Under Armour has reported an unexpected profit for the fiscal first quarter, surprising analysts and investors alike despite recording significant restructuring expenses. The sportswear manufacturer announced adjusted earnings of $0.01 per share for the quarter ending on June 30, significantly surpassing the Capital IQ-pollled consensus estimate that projected a loss of $0.08 per share.
The company did not provide a comparison figure from the previous year in its press release, which would have given further context to its current performance. Despite the positive earnings surprise, Under Armour's revenue experienced a decline, falling to $1.18 billion from $1.32 billion in the prior year.
However, this revenue figure did outperform market expectations which were set at $1.14 billion. In response to these results, Under Armour's Chief Executive Officer, Kevin Plank, expressed optimism regarding the brand's efforts to reestablish a premium market position. In a statement, he noted, "We are encouraged by early progress in our efforts to reconstitute a premium positioning for the Under Armour brand and pleased with our first quarter fiscal 2025 results that were ahead of expectations." Following the announcement, shares of Under Armour surged approximately 19% during Thursday's trading session.
Regionally, Under Armour faced challenges in North America where revenues fell by 14% to $709.3 million. Contrastingly, the European, Middle Eastern, and African markets saw an increase, with sales edging up 0.1% to $226.9 million. Latin America showed a more significant growth of around 16%, with revenues rising to $64.4 million.
However, the Asia Pacific region recorded a disappointing 10% annual decline in revenue, amounting to $181.8 million. The company also faced challenges in its wholesale and direct-to-consumer segments. Wholesale revenue slipped by 8.3%, landing at $680.5 million, while direct-to-consumer sales declined by 12%, totaling $480.2 million.
The apparel segment experienced an 8.1% revenue drop, settling at $757.8 million, and footwear sales decreased by 15% to $310.9 million. Despite the revenue challenges, Under Armour's gross margin did show positive signs, expanding by 110 basis points to 47.5%, primarily due to decreased discounting in the direct-to-consumer segment and lower product costs.
However, selling, general, and administrative expenses saw a sharp increase of 42%, reaching $837.3 million, substantially affected by a $274 million litigation reserve. The company also reported incurring significant restructuring and impairment charges totaling $25 million, along with an additional $9 million in varied expenses as part of a strategic plan initiated in May.
Under Armour previously projected a total cost of $70 million to $90 million to achieve necessary financial and operational improvements, with the remaining expenses expected to occur during fiscal 2025. Looking forward, Under Armour has revised its outlook for the ongoing fiscal year. The company now anticipates adjusted earnings per share (EPS) to fall within a range of $0.19 to $0.22, up from earlier estimates of $0.18 to $0.21.
Current market consensus predicts normalized EPS to be around $0.20. Nonetheless, revenue expectations continue to hint at a decline of low-double-digit percentages, although North American sales are now projected to dip by 14% to 16%, a slight adjustment compared to prior forecasts anticipating a drop of 15% to 17%.
In light of these results, Under Armour's stock is priced at $7.39, reflecting a change of +1.12, which corresponds to a percentage increase of +17.78..