Under Armour on Tuesday reported stronger-than-expected sales for the first quarter, boosted by the retailer's international business and growth within the apparel category. Still, weaknesses persist in the U.S., where rivals Nike and Adidas have stolen market share.
Some industry experts argue Under Armour has lost its identity in the space. The company has made moves, like collaborating with rapper A$AP Rocky, to become more of a lifestyle brand for everyday wear, but shoppers still largely view it as a utilitarian, performance line, made famous for its compression tees.
Another concern on Wall Street is Under Armour's burgeoning inventory position. Inventories climbed 27 percent to $1.1 billion in the latest period. Susquehanna analyst Sam Poser said: "inventory levels continue to appear out of control. ... The combination of high receivables and elevated inventory levels looks like a ticking time bomb to us."
Under Armour's share price initially jumped after the earnings report, but in early trading the stock was falling more than 6 percent.
Here's how the company performed for the period ended March 31:
Under Armour's net loss widened to $30.2 million, or 7 cents a share, compared with $2.3 million, or a penny per share, one year ago. The company said it had restructuring costs of $37.5 million during the quarter.
Excluding one-time items, Under Armour broke even for the quarter on a per-share basis, which was better than the 5 cent loss expected by analysts.
Under Armour's sales climbed 6 percent to $1.19 billion from $1.12 billion a year ago, again topping analysts' expectations. Sales in North America fell 0.4 percent, while those in international markets climbed 27 percent, now representing 24 percent of Under Armour's total sales.
North American sales had also fallen in the two prior periods, pointing to a larger issue that other athletic apparel and footwear brands have been fighting. In its latest quarter, though, Nike's U.S. sales slump started to reverse, putting more pressure on Under Armour to follow suit.
Under Armour said Tuesday that its men's training category helped drive apparel sales up 7 percent during the first quarter. Footwear sales were up 1 percent, while accessories sales grew 3 percent.
CEO Kevin Plank said the company is "confident" it will meet full-year targets announced back in February. The retailer is expecting sales to increase at a low single-digit percentage rate, fueled by growth outside the U.S. of more than 25 percent.
Rebounding from a rough ride in 2017, where shares tumbled 50 percent, Under Armour has convinced some investors its turnaround plans are working. The stock has gained back about 14 percent so far this year.
"The company has an opportunity to build off a bottom," Jefferies analyst Randal Konik said in a note to clients last week. "We continue to believe UA is one of 3 brands that matter in athletic."
Konik said the company still needs to "fix" its wholesale model, which has been a particularly strong issue in North America, where Adidas has picked up in popularity and taken shelf space from Nike, Puma, Reebok and others.
However, Konik pointed to Under Armour's direct-to-consumer business as a momentum driver, and the brand continues to pick up customers overseas. Its strongest international segment in the latest quarter was Asia-Pacific, where sales were up 35 percent.
Plank said on a call with analysts and investors Tuesday that Under Armour will focus on its current distribution platforms, like Dick's Sporting Goods and Kohl's, instead of adding new selling channels. He said the company should carry less inventory into 2019 as it narrows its SKU count.