Under Armour

  • Under Armour posted better-than-expected   first quarter results for 2021 and raised its sales and profit outlook for   the full year, as it expects shoppers to return to stores.

  • The company surprised the market with a   strong earnings beat, managing to make $77.8 million for the quarter ($0.17c   per share). Revenue rose 35% year-on-year, albeit off a low base, to $1.26   billion.

  • North American sales rose 32%, and its   smaller international division grew 58%, boosted by recoveries in markets   like China. Online sales were up 69% across the business.

  • It had to turn to layoffs and other   cost-cutting measures after being hit hard by the pandemic, having made a   loss of $589.7 million in the same period in the previous year. The company   also put more effort into managing its inventories better and reducing its   reliance on discounting to dispose of dated merchandise.

  • The share price has now more than doubled   from its 2020 lows.

  • Management have moved their sales growth   target from high single digit to “high-teen” growth for the year. They expect   second quarter sales to rise upwards of 70%, led by the North America and   Latin America units. Although it will realize roughly $35 million to $40   million in restructuring charges during the quarter.

  • Under Armour also announced it had agreed to   pay a $9 million settlement charge to the Securities and Exchange Commission   (SEC), after it was found to have misled investors by recording sales it   expected to complete in future quarters.

  • The company’s recovery looks to be on track   towards profitability, with gross profit margins expanding towards the 50%   mark.

  • However, even if management are able to achieve their operating profit target of $115 million for the year, this still puts Under Armour on a forward EV/EBITDA multiple of around 77x. It seems like a demanding share multiple for a company with such an underwhelming track record.

Under Armour