By Granth Vanaik
(Reuters) -Under Armour Inc forecast annual sales and profit below Wall Street estimates on Tuesday, signaling that stubborn inflation was hurting demand and higher discounts were eroding profit margins, sending the apparel maker's shares down 4%.
Cost-conscious consumers have been restricting their spending on discretionary products such as home goods, apparel and electronics to focus more on essentials amid higher interest rates and rentals.
The company's results were in contrast to industry peers Nike Inc (NYSE:NKE) and Lululemon Athletica (NASDAQ:LULU), which have seen a steady demand for their products in the recent quarter despite an inventory glut.
"Under Armour (NYSE:UA) brand does not generate the same levels of loyalty or traction as some competitors and so it is far easier for customers to deprioritize it when times get tough," said Neil Saunders, managing director at GlobalData.
Gross margins declined 310 basis points to 43.4% as the company offered higher discounts and promotions to get rid of surplus products. Inventories were up 44% at $1.2 billion.
"A low initial FY bar seemed fairly well-expected given a combination of macro, still-high inventory, and new CEO," said BMO Capital Markets analyst Simeon Siegel.
Revenue in the fourth quarter topped estimates, helped by a 3% jump in its largest market, North America, while Asia Pacific revenue surged 31% on currency neutral basis.
Under Armour expects fiscal 2024 net sales to be flat to slightly up, compared with analysts expectations of 3.7% growth.
It also sees earnings per share between 47 cents and 51 cents in 2024. Analysts expect a profit of 61 cents, according to Refinitiv data.
Net revenue rose 7.5% to $1.40 billion in the quarter ended March 31, compared with estimates of $1.36 billion.