Under Armour beat expectations with surprise profit after axing discounts

Under Armour (NYSE:UAA) shares leapt nearly 20% higher on Thursday, to $7.74, with a “surprise” profit in its first quarter of 2024, thanks to better-than-expected margins.

The sportswear brand said improved full-price sales numbers and a reduction in inventories were behind the positive performance.

In the words of chief executive Kevin Plank the company is encouraged by early progress in the “premium repositioning” of the Under Armour brand.

“Our renewed energy and alignment are proving to be critical enablers as we work to deliver superior products and storytelling while driving efficiencies, reducing promotional activity, and complexity,” Plank said in Thursday’s statement.

Gross margin improved 110 basis points, to 47.5%, it said, whilst retained stock levels reduced 15% to a value of $1.1 billion. It’s the result of fewer promotions and a higher weighting of a higher-margin product segment, namely men's apparel.

It reported $8 million of adjusted operating income, or $4 million in adjusted net income (whilst the non-adjusted number was a $305 million net loss).

Domestic revenue in North America, however, fell by 14% as the impact of inflation put constraints on customer budgets - international revenue was down only 2% by comparison.

Group revenue altogether dropped by 10% to $1.18 billion which was better than Wall Street analysts feared, with a prediction of a 13% decline.

At 1 cent per share earnings (adjusted) per share for the quarter was much better than the 8 cents per share loss forecasted on Wall Street.

Looking ahead, Under Armour upgraded its full-year guidance to a range between 19 and 22 cents, from a prior estimate of 18 to 21 cents.