Under Armour Sights COVID-19’s Spread in China for Supply Chain Issues
May 16, 2022
Under Armour reported unaudited financial results for its transition
quarter ended March 31, 2022.
successfully executed a multi-year transformation and after
delivering a record year in 2021 – we are continuing to
serve the needs of athletes amid an increasingly more
uncertain marketplace," said
Under Armour President and CEO Patrik Frisk.
"As global supply challenges and emergent COVID-19 impacts
eventually normalize, we are confident that the strength of
the Under Armour brand coupled with our
powerful growth strategy positions us well to deliver
sustainable, profitable returns to shareholders over the
Revenue was up 3 percent to $1.3 billion
(up 4 percent currency neutral) compared to the prior
Wholesale revenue increased 4 percent to $829
million and direct-to-consumer revenue
increased 1 percent to
$441 million, driven by 2 percent growth in eCommerce, which
represented 45 percent of the total
direct-to-consumer business during the quarter.
Owned and operated store revenue growth was flat
during the quarter.
America revenue increased 4 percent to
and international revenue increased 1 percent to
$456 million (up 3 percent currency
neutral). Within the international business, revenue
increased 18 percent in EMEA (up 22 percent currency
neutral), decreased 14 percent in
(down 13 percent currency neutral), and decreased 6
percent in Latin America (down 5 percent
Apparel revenue increased 8 percent to $877
million. Footwear revenue decreased 4
percent to $297 million. Accessories
revenue decreased 18 percent to $97 million.
margin decreased 350 basis points to 46.5 percent
compared to the prior year, driven primarily by elevated
Selling, general & administrative expenses increased
16 percent to $594 million.
Restructuring and impairment charges were $57
Operating loss was $46 million.
Adjusted operating income was $11 million.
loss was $60 million. Adjusted net
loss was $3 million.
Diluted loss per share was
$0.13. Adjusted diluted loss per share was
Inventory was down 3 percent to
and Cash Equivalents were
$1.0 billion at the end of the quarter, and no borrowings were
outstanding under the company's $1.1 billion
revolving credit facility.
Year End Change
in February 2021, Under Armour changed its fiscal year
from December 31 to March 31. Following a
three-month transition period (January 1 –
March 31, 2022), Under Armour's fiscal year 2023 will
run from April 1, 2022, through March
31, 2023. Consequently, there will be no fiscal year
Under Armour's fiscal year change, the comparable
baseline period is
April 1, 2021, through March 31, 2022. Based on
current visibility, including ongoing supply chain
challenges, COVID-19 uncertainty, and inflationary trends,
key points related to Under Armour's fiscal year 2023 outlook include:
is expected to increase 5 to 7 percent versus the
comparable baseline period of $5.7 billion,
reflecting a mid-single-digit growth rate in North America and a low-teens growth rate in the
international business. This expectation includes
approximately three percentage points of headwinds
related to our strategic decision to work with our
vendors and customers to cancel orders affected by
capacity issues, supply chain delays, and emergent
COVID-19 impacts in China.
margin is expected to be down 150 to 200 basis
points compared to the baseline period's adjusted gross
margin of 49.6 percent due to expected inflationary
pressures on freight and product costs, unfavorable
channel mix, and changes in foreign currency.
Operating income is expected to reach
$375 to $400 million versus the comparable
baseline period adjusted operating income of $424
Diluted earnings per share is expected to be between
$0.79 and $0.84 versus the
comparable baseline period of $0.47. This
$0.28 benefit related to a tax valuation allowance release
expected to be realized in the fourth quarter. Of this
benefit, $0.16 of this amount is related
to prior restructuring charges; therefore, adjusted
diluted earnings per share is expected to be between
$0.63 and $0.68. This is
comparable to the adjusted baseline period of
also announced that it had concluded its 2020 restructuring
plan with the recognition of $57 million
during its transition quarter that ended March 31,
2022. Under the $600 million plan
authorization, $571 million
of total charges were recognized, including $197
million of cash-related charges and $374
million of non-cash-related charges.
February 2022, Under Armour announced that its Board of Directors
authorized the repurchase of up to $500 million
of its outstanding Class C common stock, to be made over the
following two years through various methods, including open
market, privately negotiated, and accelerated share
repurchase transactions. An initial $300 million
of repurchases was completed in early May through an
accelerated share repurchase plan. The company currently has
approximately $200 million remaining under
its repurchase authorization.