Under Armour shares poised for best day since Jan 2016

Under Armour shares were poised for their best day in more than a year after the workout retailer’s first quarter results came in better than analysts had feared.

Shares in the Maryland-based company were up more than 10 per cent to $21.70 and on track for the biggest one-day gain since January 2016.

Revenues rose 7 per cent to $1.1bn in the first three months of the year – in line with estimates. Sales growth surged in Latim America, Asia-Pacific and EMEA but fell 1 per cent in North America as new distribution was offset by business lost to bankruptcies, like Sports Authority, in 2016, the company said.

Under Armour also bled red ink for the first time in its history, swinging to a loss of $2.3m during the quarter, from a profit of $19.2m in the year ago period. On a per share basis, the company reported a loss of a penny, compared with earnings of 4 cents a year ago. However, that was smaller than the 4 cent loss that analysts had forecast.

The company, which has benefitted from successful partnerships with the likes of NBA star Steph Curry and the athleisure trend, in which people sport athletic apparel even when they are not working out, has been under pressure recently. Concerns that Under Armour is losing market share to rivals Nike and Adidas and that the atheleisure trend was past its peak have weighed on the company’s shares. Indeed, the stock was down more than 30 per cent year-to-date prior to Thursday’s quarterly results.

In an effort to grow its business the company is pushing into the lifestyle category with its Under Armour Sportswear (UAS) line that interprets sportswear with fashion and tailored looks. And on the company’s earnings call founder and chief executive Kevin Plank said “we are hitting the benchmarks we set for ourselves to make lifestyle a core competency of our brand”.

The company said it continues to expect net revenue growth of between 11 to 12 per cent this year to $5.4bn.

Analysts at Jefferies argue that with these efforts, Under Armour is one of the few brands that matters in the athletic space, adding that their consumer surveys and store checks indicate an “inflection is forming”.

“Results this morning gave us greater conviction that the UAA brand is here to stay as one of the few that matter in the athletic space,” Randal Konik, an analyst at Jefferies, said. “Against a backdrop of negative sentiment and conjecture that the brand is permanently impaired, Under Armour pulled out a beat with top-line growth meeting expectations, GM better than feared, and well-controlled inventories.”

But not everyone is as optimistic.

Analysts at JPMorgan note that Thursday’s advance reflects a relief rally and the company is not “out of the woods” yet.