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Under Armour cuts forecasts on weak demand, higher discounts

Published 11/03/2022, 07:10 AM
Updated 11/03/2022, 10:56 AM
© Reuters. FILE PHOTO: Under Armour clothing is seen for sale in a store in Manhattan, New York City, U.S., February 7, 2022. REUTERS/Andrew Kelly
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(Reuters) -Under Armour Inc cut its annual revenue and profit forecasts on Thursday amid weakening demand for sporting goods and as it ramps up discounts to attract increasingly cost-conscious customers.

Weaker forecasts follow the Baltimore-based company's upbeat second-quarter sales that lifted its shares about 14%.

After two years of booming sales during the pandemic, sportswear companies have seen their fortunes plummet in the last few months as decades-high inflation forces consumers to cut back on discretionary purchases.

Larger rivals such as Nike Inc (NYSE:NKE) and Adidas AG (ETR:ADSGN) have also warned in the last few weeks of a hit to their holiday season business due to weakening demand.

"On promotions and discounting, we're not exactly expecting the market to completely get better ... but we also do believe that we'll get better as we go through next year," Under Armour (NYSE:UA) finance chief David Bergman said.

The company said it expects gross margins to fall about 550 basis points (bps) to 600 bps in the third quarter due to more promotions and the hit from a stronger dollar. Fourth-quarter gross margins are forecast to decline 100 bps to 150 bps.

CFRA analyst Zachary Warring said he still expects Under Armour to use "significant promotions" moving forward due to excess inventory across footwear and apparel retailers.

Under Armour forecast fiscal 2023 net sales to rise in low single-digit percentage, compared with its earlier outlook of a 5% to 7% increase.

© Reuters. FILE PHOTO: Under Armour clothing is seen for sale in a store in Manhattan, New York City, U.S., February 7, 2022. REUTERS/Andrew Kelly

It expects adjusted earnings per share of 56 cents to 60 cents, below its previous forecast of 61 cents to 67 cents.

Under Armour second-quarter net revenue rose 2% to $1.57 billion, beating estimates of $1.55 billion, according to Refinitiv IBES data.

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