The interior of an Under Armor store is seen on November 3, 2021 in Houston, Texas.
Brandon Bell | fake images
under armor sees a tough year ahead, hit by global supply chain challenges and another round of Covid lockdowns in China that are taking a toll on demand.
The sneaker and apparel maker issued a disappointing outlook for its 2023 fiscal year on Friday, after reporting an unexpected loss for the three months ending March 31 and sales that were below Wall Street estimates.
The news sent investors fleeing, and Under Armor shares fell more than 17% in premarket trading.
Also on Friday, rival Adidas said its growth in 2022 will be at the lower end of a forecast range due to a “severe impact” from coronavirus-related lockdowns in China. Adidas now sees its sales in the Greater China region drop significantly this year.
Here’s how Under Armor fared in the three-month period ending March 31, compared to what Wall Street anticipated, according to a Refinitiv survey of analysts:
- Loss per share: 1 cent adjusted vs. expected earnings of 6 cents
- Income: $1.3 billion vs. $1.32 billion expected
Under Armor reported a net loss for the quarter of $59.6 million, or 13 cents per share, compared with net income of $77.8 million, or 17 cents per share, a year earlier.
Excluding one-time items, it lost a penny per share. Analysts had been looking for adjusted earnings per share of 6 cents.
Sales grew to $1.3 billion from $1.26 billion the year before. That fell short of estimates of $1.32 billion.
In North America, sales grew 4% to $841 million. Its international business, however, grew just 1% to $456 million, dragged down by a 14% drop in the Asia-Pacific region, which includes China.
China is not only a growing market for Under Armor to try to win new customers, but it is also a major manufacturing hub for much of the athletic apparel industry. Various international corporations, including Apple Y estee lauderhave warned in recent days that a drag from China’s Covid controls will affect their business.
In the 12 months ending December 31, Under Armor produced approximately 67% of its apparel and accessories in China, Vietnam, Jordan, Malaysia and Cambodia. And substantially all of its footwear was made in China, Vietnam and Indonesia, an annual presentation shows.
For its fiscal year 2023, Under Armor projects to earn between 63 cents and 68 cents per share on an adjusted basis, which is below analyst expectations of 86 cents.
He sees that sales grow between 5% and 7% compared to the previous year. Analysts had expected an increase of 5.4%.
Under Armor said the outlook takes into account three percentage points of headwinds due to its decision to cancel some supplier orders due to capacity issues and supply chain delays.
Under Armor’s fiscal year runs from April 1 to March 31 of the next year.
Chief Executive Officer Patrik Frisk said the brand should return to “profitable and sustainable returns” as global supply challenges and the emerging impacts of Covid-19 in China normalize.
Find Under Armor’s full financial statement here.
This story is developing. Please check for updates.