Under Armour Shares Surge on Profit Forecast

By Ananya Mariam Rajesh

(Reuters) – Under Armour shares rose 20% in premarket trading on Thursday after the sportswear manufacturer raised its annual profit forecast, attributed to lower input costs and cost-saving strategies, including fewer discounts at its stores and website.

Following several quarters of poor results, company founder Kevin Plank returned as CEO to implement a plan to enhance profits by reducing headcount and cutting inventory for select products.

Both Under Armour (NYSE:UA) and Nike (NYSE:NKE) are working to revitalize their businesses to stimulate demand and regain market share from newer brands like Roger Federer-backed On and Deckers Outdoor (NYSE:DECK)'s Hoka.

Although Under Armour is still in the early stages of its reset, On and Hoka have introduced fresher shoe styles in the past year, becoming favorites among consumers.

Under Armour aims to sell apparel and footwear at full prices, which, along with lower discounts, increased its gross margin by 200 basis points to 49.8%.

> "It takes more than the right pricing strategy to succeed in the athleisure market. Creating products that consumers want to pay top dollar for, while minimizing reliance on sales stickers, is essential for impressing investors," said Danni Hewson, head of financial analysis at AJ Bell.

The company now expects annual adjusted per-share profit between 24 cents and 27 cents, adjusted from a previous forecast of 19 cents to 21 cents.

Excluding items, Under Armour earned 30 cents per share for the quarter, surpassing estimates of 20 cents.

> "For some time, we have believed Under Armour would best improve its business by focusing on health over growth," stated BMO Capital Markets analyst Simeon Siegel.

However, North America, its largest market, experienced a 12.9% decline in sales, while the Asia-Pacific segment reported a 10.5% downturn due to lower demand in China.

In the second quarter, net sales fell 10.7% to $1.40 billion, which was slightly better than analysts’ expectation of an 11.6% decline to $1.39 billion, as per data compiled by LSEG.