Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the first quarter ended March 31, 2019. The company reports its financial performance in accordance with accounting principles generally accepted in the United States of America ("GAAP”). This press release refers to “currency neutral” and “adjusted” amounts, which are non-GAAP financial measures described below under the “Non-GAAP Financial Information” paragraph. References to adjusted financial measures exclude the impact of the company’s 2018 restructuring plan and the related tax effects. Reconciliations of non-GAAP amounts to the most directly comparable financial measure calculated in accordance with GAAP are presented in supplemental financial information furnished with this release. All per share amounts are reported on a diluted basis.
“Our first quarter results demonstrate our unwavering commitment to protecting and growing our premium performance athletic brand through a disciplined go-to-market process that delivers innovative products and experiences to make athletes better,” said Under Armour Chairman and CEO Kevin Plank. “As we execute against our long-term plan, Under Armour will emerge from 2019 and our ‘Protect This House’ chapter as an even stronger brand and company.”
First Quarter 2019 Review
- Revenue was up 2 percent to $1.2 billion (up 3 percent currency neutral).
- Wholesale revenue increased 5 percent to $818 million and direct-to-consumer revenue was down 6 percent to $331 million, representing 27 percent of total revenue.
- North America revenue decreased 3 percent to $843 million and the international business increased 12 percent to $328 million (up 17 percent currency neutral), representing 27 percent of total revenue. Within the international business, revenue was up 3 percent in EMEA (up 9 percent currency neutral), up 25 percent in Asia-Pacific (up 30 percent currency neutral), and up 6 percent in Latin America (up 10 percent currency neutral).
- Apparel revenue increased 1 percent to $775 million. Footwear revenue increased 8 percent to $293 million primarily driven by strength in our run category. Accessories revenue decreased 11 percent to $82 million primarily driven by planned lower sales of backpacks and bags related to a strategic relaunch of key product.
- Gross margin increased 100 basis points to 45.2 percent compared to the prior year driven by product cost improvements, regional mix and prior period restructuring charges, offset by channel mix.
- Selling, general & administrative expenses decreased 1 percent to $510 million, or 42.3 percent of revenue.
- Operating income was $35 million.
- Net income was $22 million or $0.05 earnings per share.
- Inventory decreased 24 percent to $875 million.
- Total debt was down 36 percent to $590 million.
- Cash and cash equivalents increased 2 percent to $289 million.
Updated Fiscal 2019 Outlook
- Revenue is expected to be up approximately 3 to 4 percent reflecting relatively flat results for North America and a low double-digit percentage rate increase in the international business.
- Gross margin is now expected to increase approximately 110 to 130 basis points compared to 2018. Excluding restructuring charges from the comparable prior period, we now expect an increase of approximately 70 to 90 basis points compared to the 2018 adjusted gross margin due to ongoing supply chain initiatives and channel mix benefits. This compares to a previously expected range of 60 to 80 basis points in improvement compared to the 2018 adjusted gross margin.
- Operating income is now expected to reach $220 million to $230 million versus the previously expected range of $210 million to $230 million.
- Interest and other expense net is now expected to be approximately $35 million versus the previous expectation of $40 million.
- Effective tax rate is now expected to be at the high end of the 19 percent to 22 percent range.
- Earnings per share is now expected to be $0.33 to $0.34 versus the previously expected range of $0.31 to $0.33; and,
- Capital expenditures are expected to be approximately $210 million.
Change to Segment Presentation
As detailed on the company’s February 12 earnings call, effective January 1, 2019, the company changed the way management internally analyzes the business and now excludes certain corporate costs from its segment profitability measures and reports these costs within “Corporate Other”.
These costs consist largely of general and administrative expenses not allocated to an operating segment, including expenses associated with centrally managed departments such as information technology, supply chain, innovation and other corporate support functions; costs related to the company's global assets and marketing; costs related to the company’s headquarters; restructuring and restructuring related charges; and certain foreign exchange hedging gains and losses. We believe this new segment presentation provides improved visibility into the underlying performance and results of our operating segments.
In conjunction with this change, certain prior year amounts have been recast to conform to the 2019 presentation. These changes have no impact on previously reported consolidated balance sheets, statements of operations, comprehensive income (loss), stockholder’s equity, or cash flows. The recast of certain unaudited historical financial information to reflect this segment reporting change can be found at https://about.underarmour.com/investor-relations.
Conference Call and Webcast
Under Armour will hold its first quarter 2019 conference call and webcast today at approximately 8:30 a.m. Eastern Time. The call will be webcast live at https://about.underarmour.com/investor-relations/financials and will be archived and available for replay approximately three hours after the live event.
Non-GAAP Financial Information
This press release refers to “currency neutral” and “adjusted” amounts. Currency neutral financial information is calculated to exclude the impact of changes in foreign currency. Management believes this information is useful to investors to facilitate a comparison of the company's results of operations period-over-period. 2018 adjusted gross margin is referred to but not presented and excludes the impact of restructuring and other related charges. A reconciliation of 2018 adjusted gross margin is available in the company’s 2018 year-end earnings release. Management believes this information is useful to investors because it provides enhanced visibility into the company’s actual underlying results excluding the impact of its 2018 restructuring plans. These non-GAAP financial measures should not be considered in isolation and should be viewed in addition to, and not as an alternative for, the company's reported results prepared in accordance with GAAP. Additionally, the company's non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.
About Under Armour, Inc.
Under Armour, Inc., headquartered in Baltimore, Maryland, is a leading inventor, marketer and distributor of branded performance athletic apparel, footwear and accessories. Designed to make all athletes better, the brand's innovative products are sold worldwide to consumers with active lifestyles. The company’s Connected Fitness™ platform powers the world’s largest digitally connected health and fitness community. For further information, please visit https://about.underarmour.com.
Forward Looking Statements
Some of the statements contained in this press release constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, the implementation of our marketing and branding strategies, and the future benefits and opportunities from significant investments. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “assumes,” “anticipates,” “believes,” “estimates,” “predicts,” “outlook,” “potential” or the negative of these terms or other comparable terminology. The forward-looking statements contained in this press release reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to: changes in general economic or market conditions that could affect overall consumer spending or our industry; changes to the financial health of our customers; our ability to successfully execute our long-term strategies; our ability to realize expected benefits from our restructuring plans; our ability to effectively drive operational efficiency in our business; our ability to manage the increasingly complex operations of our global business; our ability to comply with existing trade and other regulations, and the potential impact of new trade, tariff and tax regulations on our profitability; our ability to effectively develop and launch new, innovative and updated products; our ability to accurately forecast consumer demand for our products and manage our inventory in response to changing demands; any disruptions, delays or deficiencies in the design, implementation or application of our new global operating and financial reporting information technology system; increased competition causing us to lose market share or reduce the prices of our products or to increase significantly our marketing efforts; fluctuations in the costs of our products; loss of key suppliers or manufacturers or failure of our suppliers or manufacturers to produce or deliver our products in a timely or cost-effective manner, including due to port disruptions; our ability to further expand our business globally and to drive brand awareness and consumer acceptance of our products in other countries; our ability to accurately anticipate and respond to seasonal or quarterly fluctuations in our operating results; our ability to successfully manage or realize expected results from acquisitions and other significant investments or capital expenditures; risks related to foreign currency exchange rate fluctuations; our ability to effectively market and maintain a positive brand image; the availability, integration and effective operation of information systems and other technology, as well as any potential interruption of such systems or technology; risks related to data security or privacy breaches; our ability to raise additional capital required to grow our business on terms acceptable to us; our potential exposure to litigation and other proceedings; and our ability to attract key talent and retain the services of our senior management and key employees. The forward-looking statements contained in this press release reflect our views and assumptions only as of the date of this press release. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
Under Armour Contacts:
SVP, Investor Relations & Corporate Development
SVP, Corporate Communications