Under Armour Inc (UAA, Financial) released its 8-K filing on November 7, 2024, announcing its financial results for the second quarter of fiscal 2025, which ended on September 30, 2024. The Baltimore-based company, known for its athletic apparel, footwear, and accessories, reported a revenue decline but exceeded earnings expectations, reflecting its ongoing strategic efforts to reposition its brand in the marketplace.
Performance Overview and Strategic Challenges
Under Armour Inc (UAA, Financial) reported a revenue of $1.4 billion for the quarter, marking an 11% decrease compared to the previous year. This decline was in line with expectations as the company continues to navigate its strategic restructuring plan. North American revenue fell by 13% to $863 million, while international revenue decreased by 6% to $538 million. The company is facing challenges in key markets, including a 13% decline in Latin America and an 11% drop in Asia-Pacific.
The company's wholesale revenue decreased by 12% to $826 million, and direct-to-consumer revenue fell by 8% to $550 million. Despite these declines, Under Armour Inc (UAA, Financial) is focusing on reducing promotional activities, which led to a 21% decrease in eCommerce revenue.
Financial Achievements and Industry Implications
Despite the revenue decline, Under Armour Inc (UAA, Financial) achieved a gross margin increase of 200 basis points to 49.8%, driven by lower product and freight costs and reduced discounting levels. This improvement is significant in the apparel and accessories industry, where maintaining profitability amid declining sales is challenging.
The company reported a net income of $170 million, with diluted earnings per share of $0.39, surpassing the analyst estimate of $0.21 per share. This performance underscores the effectiveness of Under Armour Inc (UAA, Financial)'s strategic initiatives to enhance brand positioning and operational efficiency.
Key Financial Metrics and Analysis
Under Armour Inc (UAA, Financial) reported a decrease in selling, general, and administrative expenses by 15% to $520 million, reflecting the company's efforts to streamline operations. Inventory levels decreased by 3% to $1.1 billion, indicating improved inventory management.
The company's cash and cash equivalents totaled $531 million, with no borrowings under its $1.1 billion revolving credit facility, highlighting a strong liquidity position. This financial stability is crucial for supporting ongoing restructuring efforts and future growth initiatives.
“Our second quarter fiscal 2025 performance demonstrates that our strategy to reconstitute the Under Armour brand and establish a more premium position in the marketplace is gaining traction,” said Under Armour President and CEO Kevin Plank.
Outlook and Future Prospects
Under Armour Inc (UAA, Financial) has raised its fiscal 2025 profitability outlook, anticipating a gross margin increase of 125 to 150 basis points. The company expects a low double-digit percentage decline in revenue, with a significant focus on resetting its North American business. Despite these challenges, Under Armour Inc (UAA) is investing in marketing to strengthen its brand presence.
Overall, Under Armour Inc (UAA, Financial)'s second-quarter results reflect a company in transition, balancing revenue challenges with strategic initiatives to enhance profitability and brand positioning. The company's ability to navigate these challenges will be critical in maintaining its competitive edge in the athletic apparel industry.
Explore the complete 8-K earnings release (here) from Under Armour Inc for further details.
