Earnings and Revenue Beat Expectations as Under Armour Raises Outlook

Despite Under Armour's stellar holiday quarter earnings on Wednesday, the retailer's inventory glut remains an issue that major promotions and discounting can't resolve, and the retailer is looking for alternative strategies to alleviate it.

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In light of pre-market trading, the stock price of the company rose.

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The athletic apparel company raised its earnings outlook for the fiscal year in spite of the difficulties it has faced with the inventory. Compared to the previous expectation of 44 cents to 48 cents per share, it now expects to earn 52 cents to 56 cents per share, down from 44 cents to 48 cents per share.

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Based on Refinitiv's survey of analysts, Under Armour performed better than Wall Street expected:

• Earnings per share: 16 cents adjusted, compared with 9 cents expected
• Revenue: $1.58 billion, up from the $1.55 billion predicted

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Based on reports from the company, its net income for the three-month period ended Dec. 31 was $121.62 million, which is higher than its net income of $109.66 million recorded a year earlier. The company's sales increased from $1.53 billion a year ago to $1.58 billion during the same period.

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A number of retailers, including athletic apparel companies, have been experiencing inventory glutes for the past few years as a result of supply chain issues and changing trends in consumer demand. It is reported that Under Armour's inventory increased by 50% year-over-year during its fiscal third quarter. The inventory level of this company was slightly up compared to last quarter despite heavy promotions and discounts during its crucial holiday quarter. It is continuing to be a difficult time for Under Armour's margins, which declined 6.5% over the previous year's period, due to promotions and discounts.

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Direct-to-consumer revenue for the company dropped by 4% in the company's third quarter, as it experienced a 7% jump in wholesale revenue.

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Under Armour saw a 9% decline in sales in Asia, but a big gain in international sales. In Latin America, revenue increased by 45% while in Europe, the Middle East, and Africa, it increased by 32%.

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Under Armour's apparel sales dropped 2%, but footwear sales jumped 25%, offsetting the apparel decline.

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Stephanie Linnartz, a former Marriott executive, was announced as the company's new CEO in December. She will start in the role on Feb. 27. Following the unexpected resignation of the retailer's previous top executive, Patrik Frisk, in May, Colin Browne has been serving as interim CEO for the retailer since June.

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In order to accelerate Under Armour's digital initiatives, the company is utilizing Linnartz's experience leading Marriott's multibillion-dollar digital transformation in order to speed up the process of building out its e-commerce operations.

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Under Armour's DTC revenue came from 45% of e-commerce sales in the most recent quarter.