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Under Armour (UAA) Q4 Earnings Top Estimates, E-Commerce Gains

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Zacks Equity Research
·4 min read
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In spite of a challenging backdrop, Under Armour, Inc. UAA reported better-than-expected fourth-quarter 2020 results that gained from stellar e-commerce sales and strength in Asia-Pacific region. While the top line declined, the bottom line showcased an improvement from the year-ago quarter. This developer, marketer and distributor of apparel, footwear, and accessories highlighted that brand strength and better execution contributed to this upbeat performance. Markedly, management now envisions revenues to increase in 2021.

Under Armour, which recently concluded the sale of MyFitnessPal platform to Francisco Partners, reported adjusted earnings of 12 cents a share that fared far better than analysts’ expectations. The Zacks Consensus Estimate for the quarter was pegged at a loss of 7 cents. The bottom line also increased from adjusted earnings of 10 cents a share in the year-ago period owing to better expense management.

Net revenues of $1,403.8 million surpassed the Zacks Consensus Estimate of $1,265.9 million, thus marking the third straight beat. However, the top line fell 2.6% on a year-over-year basis. While wholesale revenues declined 12% year over year to $662 million, direct-to-consumer revenues rose 11% to $655 million buoyed by 25% jump in e-commerce sales.

Markedly, shares of this Baltimore-based company were up during the pre-market trading hours on Feb 10. Meanwhile, this Zacks Rank #3 (Hold) stock has increased 42.8% compared with the industry’s rally of 16.8% in the past three months.

Management notified that the vast majority of locations where Under Armour is sold are now operational. Although traffic trends remained soft in the company's owned and operated retail outlets, the overall rate of conversion remained robust. Impressively, the company registered sturdy e-commerce growth globally during the quarter under review. However, management cautioned that the ongoing pandemic is likely to impact the company’s results.

Under Armour, Inc. Price, Consensus and EPS Surprise

Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. Price, Consensus and EPS Surprise

Under Armour, Inc. price-consensus-eps-surprise-chart | Under Armour, Inc. Quote

Let’s Take an Insight

By product category, Apparel revenues declined 4% year over year to $931.4 million, while Footwear revenues decreased 7.1% to $240.9 million. Revenues from Accessories category surged 32% to $145.2 million. Meanwhile, Licensing revenues dropped 12.3% to $54.5 million. Again, the company’s Connected Fitness segment witnessed a decline of 5.1% to $33.2 million.

Net revenues from North America fell 6% to $923.7 million. Revenues from international business grew 7% (or up 4.1% on a currency neutral basis) to $448 million. Within international business, net revenues from Asia-Pacific and Latin America increased 26.1% and 2.2% to $230.8 million and $56.3 million, respectively. We note that revenues from EMEA region tumbled 10.8% to $161.2 million.

The company’s adjusted gross margin expanded 300 basis points to 50.3% owing to benefits from channel mix, supply chain initiatives and regional mix.

Other Financial Details

Under Armour ended the quarter with cash and cash equivalents of $1,517.4 million (including $199 million in net cash proceeds from the MyFitnessPal platform sale), long-term debt of $1,003.6 million and total stockholders' equity of $1,676 million.

2021 View

Management anticipates full-year 2021 revenues to increase at a high-single-digit percentage rate. This reflects a high single-digit growth rate in North America and a high-teens growth rate in the international business. The company forecasts adjusted earnings in the band of 12-14 cents a share, the mid-point of which — 13 cents — is below the current Zacks Consensus Estimate of 14 cents.

Under Armour anticipates full year gross margin to be up marginally when compared with the prior year adjusted gross margin of 48.6%. Management highlighted that benefits from pricing and supply chain efficiency will largely be offset by high gross margin business, MyFitnessPal, which the company sold off. The company guides adjusted operating income between $130 million and $150 million.

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