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Under Armour Rises on Revenue Beat

- By Omar Venerio

In Tuesday trading, shares of Under Armour Inc. (UA) rose 15% on the back of the company posting its financial results for the fourth quarter of 2017.

For the quarter, Under Armour reported annual net sales growth of 4.6% to $1.37 billion and breakeven profit, which was in line with estimates. Quarterly revenue exceeded analysts' estimates by $60 million.

Wholesale customer revenue declined 1% to $733 million, but direct-to-consumer revenue grew 11% to $575 million. Direct-to-consumer represented 42% of global revenue in the quarter.

Geographically, revenue in North America was down 4%, while revenue in Europe, the Middle East and Africa (EMEA) was up 45%, Asia-Pacific increased 56% and Latin America grew 36%.

Under Armour said the gross margin declined 150 basis points to 43.2% as foreign exchange rates and product costs were offset by pricing and inventory management initiatives and channel mix. The adjusted gross margin, which does not take into account the $1 million impact from restructuring efforts, was 43.3%.

Chairman and Kevin Plank commented on the company's perfomance.

"After years of rapid growth and building a globally recognized brand, the dynamic landscape of 2017 was a catalyst for us to begin strategically transforming Under Armour into an operationally excellent company," he said. "A year into this journey, our fourth quarter and full year results demonstrate that the tough decisions we're making are generating the stability necessary to create a more consistent and predictable path to deliver long-term value to our shareholders."

Moreover, the company's outlook for 2018 is solid. Net revenue is projected to grow at a low single-digit percentage due to a decline in North America. Under Armour expects the gross margin to increase approximately 50 basis points to 45.5%. The company forecasts operating income will be between $20 million and $30 million and adjusted diluted earnings per share should range between 14 cents and 19 cents.

Disclosure: The author holds no positions in any stocks mentioned.

This article first appeared on GuruFocus.