Under Armour, Inc. (NYSE: UA, UAA) announced on July 30, 2019 its financial results for the second quarter ended June 30, 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 second quarter results give us increasing conviction that our transformation continues to make solid progress across our business, unlocking efficiencies that are driving greater precision, consistency and repeatability,” said Under Armour Chairman and CEO Kevin Plank. “By staying sharply focused on our long-term strategies – driving our premium athletic brand positioning through industry leading innovation, geographic expansion and creating deep connections with our consumers – we are on track to deliver against our expectations in 2019.”
Second Quarter 2019 Review
• Revenue was up 1 % to USD 1.2 billion (up 3 % currency neutral).
o Wholesale revenue decreased 1 % to USD 707 million and direct-to-consumer revenue was up 2 % to USD 423 million, representing 35 % of total revenue.
o North America revenue decreased 3 % to USD 816 million and the international business increased 12 % to USD 339 million (up 17 % currency neutral) representing 28 % of total revenue. Within the international business, revenue was up 6 % in EMEA (up 11 % currency neutral), up 23 % in Asia-Pacific (up 29 % currency neutral) and down 3 % in Latin America (up 2 % currency neutral).
o Apparel revenue decreased 1 % to USD 740 million; footwear revenue increased 5 % to USD 284 million; and accessories revenue was unchanged at USD 106 million.
• Gross margin increased 170 basis points to 46.5 % compared to the prior year driven by supply chain initiatives, regional mix and restructuring charges in the prior period offset by foreign currency impacts.
• Selling, general & administrative expenses increased 2 % to USD 566 million, or 47.5 % of revenue.
• Operating loss was USD 11 million.
• Net loss was USD 17 million or USD 0.04 loss per share, inclusive of a negative USD 0.01 impact from the company’s minority interest in its Japanese licensee.
• Inventory decreased 26 % to USD 966 million.
• Total debt was down 24 % to USD 591 million.
• Cash and cash equivalents increased 131 % to USD 456 million.
Fiscal 2019 Outlook
• Revenue is expected to be up approximately 3 to 4 % reflecting a slight decline in North America and a low to mid-teen %age rate increase in the international business.
• Gross margin is expected to increase approximately 110 to 130 basis points compared to 2018. Excluding restructuring charges from the comparable prior period, we expect an increase of approximately 70 to 90 basis points compared to 2018 adjusted gross margin due to ongoing supply chain initiatives and channel mix benefits.
• Operating income is now expected to reach approximately USD 230 million to USD 235 million versus the previously expected range of USD 220 million to USD 230 million.
• Interest and other expense, net is now expected to be approximately USD 30 million versus the previous expectation of approximately USD 35 million.
• Effective tax rate is now expected to be approximately 22 % versus the previous expectation at the high end of a 19 % to 22 % range.
• Earnings per share is expected to be USD 0.33 to USD 0.34 inclusive of a negative impact from the company’s minority interest in its Japanese licensee.
• Capital expenditures are expected to be approximately USD 210 million.
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.
Under Armour, Inc., headquartered in Baltimore, Maryland, is a leading inventor, marketer and distributor of branded athletic performance apparel, footwear and accessories. Powered by one of the world’s largest digitally connected fitness and wellness communities, Under Armour’s innovative products and experiences are designed to help advance human performance, making all athletes better.
