Under Armour (UAA) shares slumped lower Friday after the sports apparel group posted stronger-than-expected fourth quarter earnings but noted that Covid-linked supply chain disruptions would have impact its spring and summer orders.
Under Armour said adjusted earnings for the three months ending in December came in at 14 cents per share, up 16.7% from the same period last year and double the Street consensus forecast. Group revenues, Under Armour said, rose 9% to $1.5 billion, again topping the consensus analysts' estimate of a $1.47 billion tally.
Looking into the 2022 financial year, Under Armour said it sees "a mid single-digit" percentage growth rate for revenues over the first quarter, up for a prior forecast for "low single-digit" gains, even as it noted "headwinds related to reductions in our spring-summer 2022 order book from supply constraints associated with ongoing COVID-19 pandemic impacts."
Diluted earnings for the quarter were forecast between 2 and 3 cents per share, Under Armour said, as gross profit margins take a 240 basis point hit from higher freight costs and other supply chain challenges.
"The final quarter of 2021 demonstrated the power and consistency of Under Armour's strategic playbook, which allowed us to capitalize on improving brand strength and consumer demand," said CEO Patrik Frisk. "By staying hyper-focused on operational excellence and serving the needs of athletes, we were able to deliver record revenue and earnings results for the full year."
"Amid a dynamic environment with ongoing COVID-19 impacts and resultant supply chain headwinds, I am proud of how consistently our global teams continue to execute our plan," he added. "As we navigate ongoing uncertainty in the marketplace, we remain focused on delivering industry-leading innovations, premium experiences, and empowering those who strive for more. Going forward, I am confident that we are running a stronger company – one that is able to deliver sustainable, profitable growth and value creation for our shareholders over the long term."
Under Armour shares were marked 9.7% lower in early Friday trading following the earnings release to change hands at $18.1 each, extending the stock's six-month decline to around 30%.
"Unlike most companies calling out inventory constraints but posting material year-on-year growth, Under Armour actually saw inventory decline ~9%," said BMO Capital Markets analyst Simeon Siegel, who carries an 'outperform' rating with a $25 price target on the stock.
"Although this may cap near-term revenue (as suggested by management), it should also continue to help re-elevate the brand and help gross margins," he added.
