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Under Armour (UAA) Q2 Loss In Line, Revenues Top Estimates
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Under Armour, Inc. (UAA - Free Report) reported second-quarter 2018 loss of 8 cents a share that came in line with the Zacks Consensus Estimate but widened from the year-ago loss of 3 cents. Meanwhile, the top line came ahead of the consensus mark for the third straight quarter, and also increased year over year. Moreover, this sportswear maker registered sales growth in North America. The company has been reporting sluggish sales from the region for quite some time.
Let’s Delve Deep
Net revenues came in at $1,174.9 million, up 7.7% (up 7% on a currency neutral basis) from the prior-year period and surpassed the Zacks Consensus Estimate of $1,153 million. Notably, shares of this Zacks Rank #3 (Hold) company are up roughly 9% during the pre-market trading hours. In the past three months, the company’s shares have surged about 18% compared with the industry’s gain of 12%.
Apparel sales rose 9.8% to $747.3 million, while Footwear net revenues grew 14.5% to $271.4 million in the quarter under review. Net revenues in the Accessories category declined 13.6% to $105.9 million, while Licensing revenues fell 15.7% year over year to $21.2 million. The company’s Connected Fitness segment reported an increase of 12.3% to $29.1 million.
Net revenues from North America jumped 1.6% (up 1% on a currency neutral basis) to $843.4 million. Remarkably, international business continued to witness sturdy growth surging 28% (up 24% on a currency neutral basis) to $302 million. International business now represents 26% of total revenue. Within international business net revenues from EMEA, Asia-pacific and Latin America jumped 30.8%, 34.3% and 7.3% to $135.9 million, $125.7 million and $40.8 million, respectively.
The company informed that adjusted gross margin contracted 60 basis points to 45.3% due to aggressive inventory management.
SG&A expenses rose 9.9% to $552.6 million, while as a percentage of net revenues the same expanded 90 basis points to 47% on account of sustained investments in direct-to-consumer, footwear and international businesses. Moreover, interest expense increased 9.1% to $8.6 million. Analysts pointed that higher SG&A and interest expense might have weighed upon the bottom line.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $196.9 million, up 18.8% from the prior-year quarter. Long-term debt (net of current maturities) was $752.4 million compared with $777.7 million a year ago. Shareholders' equity at the end of the quarter was $1,923.9 million.
2018 Guidance
Management now envisions 2018 net revenues to increase in the range of 3-4%. While revenues from North America are likely to decline in low to mid-single-digit, international revenues are likely to increase more than 25%. The Zacks Consensus Estimate for revenues is pegged at $5.17 billion.
From the perspective of products, apparel is projected to improve at a mid-single digit rate, while footwear at a low-single digit rate. Accessories is likely to decline at a low-single digit rate.
Under Armour expects adjusted gross margin to improve marginally on account of product costs and lower promotional activity, offset by increased inventory management.
Adjusted operating income is expected around $130-$160 million. The company projects interest and other expense net to be about $45 million. The company expects to incur capital expenditures of nearly $200 million in 2018.
Management continues to expect adjusted earnings per share in the range of 14-19 cents per share. The Zacks Consensus Estimate is pegged at 18 cents per share.
Columbia Sportswear (COLM - Free Report) delivered an average positive earnings surprise of 18.1% in the trailing four quarters. It carries a Zacks Rank #2 (Buy).
Hanesbrands (HBI - Free Report) delivered an average positive earnings surprise of 1.6% in the trailing four quarters. It has a long-term earnings growth rate of 7.5% and a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Under Armour (UAA) Q2 Loss In Line, Revenues Top Estimates
Under Armour, Inc. (UAA - Free Report) reported second-quarter 2018 loss of 8 cents a share that came in line with the Zacks Consensus Estimate but widened from the year-ago loss of 3 cents. Meanwhile, the top line came ahead of the consensus mark for the third straight quarter, and also increased year over year. Moreover, this sportswear maker registered sales growth in North America. The company has been reporting sluggish sales from the region for quite some time.
Let’s Delve Deep
Net revenues came in at $1,174.9 million, up 7.7% (up 7% on a currency neutral basis) from the prior-year period and surpassed the Zacks Consensus Estimate of $1,153 million. Notably, shares of this Zacks Rank #3 (Hold) company are up roughly 9% during the pre-market trading hours. In the past three months, the company’s shares have surged about 18% compared with the industry’s gain of 12%.
Apparel sales rose 9.8% to $747.3 million, while Footwear net revenues grew 14.5% to $271.4 million in the quarter under review. Net revenues in the Accessories category declined 13.6% to $105.9 million, while Licensing revenues fell 15.7% year over year to $21.2 million. The company’s Connected Fitness segment reported an increase of 12.3% to $29.1 million.
Net revenues from North America jumped 1.6% (up 1% on a currency neutral basis) to $843.4 million. Remarkably, international business continued to witness sturdy growth surging 28% (up 24% on a currency neutral basis) to $302 million. International business now represents 26% of total revenue. Within international business net revenues from EMEA, Asia-pacific and Latin America jumped 30.8%, 34.3% and 7.3% to $135.9 million, $125.7 million and $40.8 million, respectively.
Price, Consensus and EPS Surprise
Price, Consensus and EPS Surprise | Quote
The company informed that adjusted gross margin contracted 60 basis points to 45.3% due to aggressive inventory management.
SG&A expenses rose 9.9% to $552.6 million, while as a percentage of net revenues the same expanded 90 basis points to 47% on account of sustained investments in direct-to-consumer, footwear and international businesses. Moreover, interest expense increased 9.1% to $8.6 million. Analysts pointed that higher SG&A and interest expense might have weighed upon the bottom line.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $196.9 million, up 18.8% from the prior-year quarter. Long-term debt (net of current maturities) was $752.4 million compared with $777.7 million a year ago. Shareholders' equity at the end of the quarter was $1,923.9 million.
2018 Guidance
Management now envisions 2018 net revenues to increase in the range of 3-4%. While revenues from North America are likely to decline in low to mid-single-digit, international revenues are likely to increase more than 25%. The Zacks Consensus Estimate for revenues is pegged at $5.17 billion.
From the perspective of products, apparel is projected to improve at a mid-single digit rate, while footwear at a low-single digit rate. Accessories is likely to decline at a low-single digit rate.
Under Armour expects adjusted gross margin to improve marginally on account of product costs and lower promotional activity, offset by increased inventory management.
Adjusted operating income is expected around $130-$160 million. The company projects interest and other expense net to be about $45 million. The company expects to incur capital expenditures of nearly $200 million in 2018.
Management continues to expect adjusted earnings per share in the range of 14-19 cents per share. The Zacks Consensus Estimate is pegged at 18 cents per share.
Stocks to Consider
G-III Apparel (GIII - Free Report) has a long-term earnings growth rate of 15% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Columbia Sportswear (COLM - Free Report) delivered an average positive earnings surprise of 18.1% in the trailing four quarters. It carries a Zacks Rank #2 (Buy).
Hanesbrands (HBI - Free Report) delivered an average positive earnings surprise of 1.6% in the trailing four quarters. It has a long-term earnings growth rate of 7.5% and a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>