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Under Armour, a leading athletic apparel and footwear company, released its financial report for the third quarter of 2024, which showed a mixed performance.
The company's adjusted earnings per share (EPS) of 19 cents beat expectations by 8 cents, while net revenue fell 6.1% year-over-year to $1.49 billion, missing analysts' estimates of $1.5 billion.
Wholesale revenue decreased 13% to $712 million, while direct-to-consumer revenue increased 4% to $741 million, due to a 5% increase in owned and operated store revenue and a 2% increase in eCommerce revenue, which represented 45% of the total direct-to-consumer business in the quarter.
North America revenue decreased 12% to $915 million, while international revenue increased 7% to $566 million (up 4% currency neutral).
In the international business, revenue increased 7% in EMEA (up 2% currency neutral), 7% in Asia-Pacific (up 8% currency neutral), and 9% in Latin America (up 3% currency neutral). Apparel revenue decreased 6% to $1 billion, while footwear revenue was down 7% to $331 million. Accessories revenue was flat at $105 million.
In the third quarter, Under Armour's adjusted operating income was $92.0 million, down 2.8% year-over-year. The company's inventory was $1.10 billion, a decrease of 9.3% year-over-year, and its total location count was 440, a 0.5% increase year-over-year.
Gross margin increased 100 basis points to 45.2%, driven primarily by supply chain benefits related to lower freight expenses, partially offset by proactive inventory management actions, including a higher percentage of sales to the off-price channel and increased promotional activities in the direct-to-consumer business.
Net income was $114 million, while adjusted net income, excluding a $50 million earn-out benefit in connection with the sale of the MyFitnessPal platform, the litigation reserve expense, and related tax impacts, was $84 million.
Diluted earnings per share was $0.26, while adjusted diluted earnings per share was $0.19.
Under Armour's inventory was down 9% to $1.1 billion.
The company's updated fiscal 2024 outlook indicates that revenue is expected to be down 3% to 4%, tightening the previous expectation of a 2% to 4% decline. Gross margin is expected to be up 120 to 130 basis points, an increase from the prior expectation of a 100 to 125 basis point increase. Selling, general & administrative expenses are unchanged from the previous expectation of flat to down slightly. Operating income is expected to reach $287 million to $297 million. Excluding the company's litigation reserve, adjusted operating income is expected to be $310 million to $320 million.
Diluted earnings per share is expected to be $0.57 to $0.59, which includes $0.12 of after-tax benefit from the company's final earn-out in connection with the sale of the MyFitnessPal platform and $0.05 of negative impact from the company's litigation reserve. Excluding these net positive impacts of $0.07, the company expects its adjusted diluted earnings per share to be $0.50 to $0.52.
Capital expenditures are now expected to reach between $210 million and $230 million, versus the previous expectation of $230 million and $250 million.
In conclusion, Under Armour's third-quarter results showed a mixed performance, with better-than-expected profitability but lower revenue. The company's outlook for the remainder of the year is cautious, with expectations for lower revenue and increased gross margins. Investors will be watching to see if the company can regain momentum in the coming quarters.