Apparel brand Under Armour on Thursday raised its annual profit and margin predictions, anticipating that lower input and freight costs would help overcome poor demand in North America, sending its shares up 6 per cent.
The firm is relying on decreased manufacturing costs to boost profits at a time when demand for its garments and footwear has stalled, despite substantial discounts to clients who are holding back on spending owing to high inflation.
Lower expenditure resulted in a third consecutive quarter of declining sales in its major North American market, and the business fell short of market forecasts for third-quarter revenue.
It has also taken a blow as distributors like as Dick’s Sporting Goods and Foot Locker reduce orders in the United States.
Wholesale sales declined 13 per cent during the quarter, but direct-to-consumer (DTC) revenue increased 4 per cent as deeper promotions helped attract more customers in this channel.
“(Gross margins) are going to be better in this current fiscal year…but the problem is that Under Armour has been around the same sales level for several years,” Morningstar analyst David Swartz said.
Under Armour now anticipates an annual gross margin increase of 120 to 130 basis points and a profit of 57 to 59 cents per share in fiscal 2024, up from 47 to 51 cents before.
However, CFO David Bergman cautioned that promotions would have “a little bit” of an impact on gross margins.
Its third-quarter sales of USD 1.49 billion fell short of LSEG’s projection of USD 1.50 billion, while its adjusted profit of 19 cents exceeded expectations of 11 cents.
