Under Armour raises outlook as earnings and revenue beat expectations

Under the Armour On Wednesday, it reported holiday quarter earnings that beat Wall Street expectations, but the retailer is battling a growing inventory glut that heavy promotions and discounts failed to ease.

The company’s stock rose in light premarket trading.

Despite inventory challenges, the athletic apparel company raised its revenue outlook for the fiscal year. It now expects to see earnings per share of 52 cents to 56 cents, compared with a previously expected range of 44 cents to 48 cents.

Here’s how Under Armor did in its fiscal third quarter compared to Wall Street’s expectations, based on a survey of analysts by Refinitiv:

• Earnings per share: 16 cents adjusted vs. 9 cents expected
• Income: $1.58 billion vs. $1.55 billion expected

The company reported net income of $121.62 million for the three-month period ended Dec. 31, up from $109.66 million a year earlier. Sales rose to $1.58 billion, from $1.53 billion a year ago.

Like other retailers, the athletic apparel company is dealing with inventory gluts due to supply chain concerns and changing trends in consumer demand. During its fiscal third quarter, Under Armor’s inventory grew 50% year-over-year. Despite heavy promotions and discounts during the key holiday quarter, inventory was slightly up from its previous quarter.

Promotions and discounts continued to weigh on Under Armour’s margins, which fell 6.5 percent from the year-ago period.

The company saw a 7 percent increase in wholesale revenue and a decline in its direct-to-consumer sales.

While sales in Asia were down 9%, Under Armor saw big gains internationally. Revenue grew 45% in Latin America and 32% in Europe, Middle East and Africa.

A 2% decline in apparel, largely driven by Under Armour’s sales, was offset by a 25% increase in footwear revenue.

In December, the company announced that former Marriott executive Stephanie Linnartz would take over as CEO starting February 27. May

Under Armor is working to develop its e-commerce operations and is drawing on Linnartz’s experience leading Marriott’s multibillion-dollar digital transformation to accelerate the company’s digital initiatives.

E-commerce sales grew 4% in the quarter and accounted for 36% of Under Armour’s total DTC revenue.

Read the full earnings release here.