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Under Armour on Thursday reported quarterly earnings and sales that topped analysts' expectations, as it sold more running shoes and cleaned up inventories, sending its stock soaring. It also raised its profit outlook for 2019.
The athletic apparel retailer reported earnings of 5 cents a share for the first quarter ended March 31 on sales of $1.21 billion. Analysts were calling for Under Armour to break even on a per-share basis, with sales of $1.18 billion, according to a Refinitiv survey.
Under Armour shares jumped more than 7% in early trading on the news. Including those gains, the stock has climbed more than 34% this year, bringing Under Armour's market cap close to $10.6 billion.
Under Armour said it now expects annual 2019 earnings to fall within a range of 33 to 34 cents per share, compared with a prior range of 31 to 33 cents. It's still calling for revenues to be up roughly 3% to 4% overall, with sales growth remaining "relatively flat" in North America.
Sales in North America were down 3% during the quarter, amounting to $843 million, while international revenues grew 12%, to $328 million. Under Armour said revenues from international markets now make up 27% of total sales.
The company has been grappling with how to grow U.S. sales amid a landscape flush with competition from Adidas, Nike and Lululemon. Nike during its latest quarter managed to grow North American sales by 7%, for example.
Part of Under Armour's efforts to turn things around have included cutting staff, trimming excess inventory sitting in warehouses, and promising a bigger focus on new shoes and women's items. Some of its best-selling footwear brands now include Project Rock, Curry 6 and the Hovr sneakers.
COO Patrik Frisk told analysts during a post-earnings conference call the brand has "stabilized" in North America, as it continues to push toward selling more at "premium" price points, thereby pulling out of some discount channels. Like Nike, Under Armour is also trying to grow its direct-to-consumer business, which is said now represents 27% of total revenues.
CEO Kevin Plank has said the Baltimore-based company plans to stay true to its "performance" gear, like moisture-wicking shirts, despite "athleisure" gaining more momentum in its home turf. Some analysts say Under Armour is struggling because the company is choosing not to pivot toward the yoga pants and casual-wear trend as much as its rivals.
"We are going to continue to get louder as a brand," Plank said Thursday. "About telling people what ... and why this brand is so special. Everything we build does something."
Beyond Nike and Adidas, though, Under Armour faces heightened competition from "resurgent 1990s brands that appeal to a broader customer base and resonate better with women," Telsey Advisory Group analyst Cristina Fernandez said.
Under Armour also recently lost its North American president, Jason LaRose, with COO Patrik Frisk filling the position until a replacement is found.
Apparel sales were up 1% during the first quarter, while footwear sales grew 8% thanks to a strong running business, Under Armour said. Accessories revenues were down 11% due to Under Armour selling less backpacks and bags than anticipated.
Under Armour said its inventories dropped 24%, to $875 million. It said its gross margin grew by 100 basis points, to 45.2%.
Under Armour said in a separate press release Thursday that it has adjusted its year-earlier financial results to reflect changes in how it accounts for some corporate expenses. Costs related to its headquarters and supply-chain upgrades will now be excluded from its operating segments. As a result, Under Armour said it has revised its targets for these segments to reflect the changes.