Under Armour earnings, sales top expectations. And the stock is swinging all over the place

Key Points
  • Under Armour's fourth-quarter earnings and sales beat estimates. 
  • The retailer doesn't make any changes to its 2019 outlook. 
  • North America is still a weak spot for Under Armour, as growth comes from overseas. 
The Under Armour logo is displayed at T & B Sports in San Rafael, California.
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Under Armour shares seesawed Tuesday after the sneaker maker reported better-than-expected fourth-quarter earnings and revenue, boosted by apparel sales and growth overseas.

The stock surged more than 5 percent in premarket trading before falling more than 3 percent and rebounding after the markets opened. Shares were last up more than 7 percent.

Wall Street likes Under Armour's progress in slashing excess inventory — getting rid of items that didn't sell well in stores and online — and generating excitement among shoppers around new product launches. But analysts and investors are still concerned about the retailer's U.S. sales, which fell 2 percent in 2018 and still lag rivals Nike and Adidas.

"We worry the burden of proof lies on management to inflect its North America, direct-to-consumer and footwear trends," Nomura Instinet analyst Simeon Siegel said.

Under Armour earned 9 cents per share on an adjusted basis during the fourth quarter, topping analyst expectations of 4 cents per share, according to average estimates compiled by Refinitiv.

Sales rose 1.5 percent to $1.39 billion, ahead of expectations for $1.38 billion.

Under Armour said U.S. sales fell 6 percent from the previous year to $965 million during the fourth quarter, while international sales climbed 28 percent, after adjusting for fluctuations in foreign exchange rates, to $395 million and now account for 28 percent of its total revenue.

It said apparel sales were up 2 percent, fueled by its training business. Footwear sales were down 4 percent, as Under Armour said it sold fewer shoes in discount stores during the holiday period. Accessories sales declined 2 percent.

The retailer didn't make any changes to its outlook for 2019, which it originally laid out in December.

It's still calling for sales to be "relatively flat" in North America this year; up 3 to 4 percent overall. Wall Street was largely disappointed when Under Armour first announced these targets. Analysts said at the time they imply the focus this year will still be on investing and that more meaningful growth won't come until 2020 or later.

Under Armour has been grappling with how to grow U.S. sales amid a landscape flush with competition from Adidas, Nike and Lululemon. Part of its efforts to turn things around have included cutting staff, finding ways to trim excess inventory sitting in warehouses and promising a bigger focus on new sneakers and women's items.

Under Armour said inventory levels dropped 12 percent during the fourth quarter to $1 billion.

On a call with analysts Tuesday morning, CEO Kevin Plank said the company plans to stay true to its "performance" gear, despite "athleisure" wear gaining more momentum in the U.S. of late. "We get athleisure ... but we believe Under Armour is born on the field," Plank said. "It's technical in its nature."

Some of the retailer's best-selling footwear brands include Project Rock, Curry 6 and its Hovr sneakers. Under Armour also recently announced it's going to be spaceflight company Virgin Galactic's "technical spacewear partner," making custom spacesuits and shoes for astronauts.

"We are building scarcity [with new products] on purpose, to make sure we are gaining traction versus pushing product in the marketplace," President Patrik Frisk told CNBC.

Under Armour shares have climbed more than 50 percent over the past year.