Under Armour Shares Fall as It Warns of Persistent Supply-Chain Issues

Under Armour’s Class A shares were recently down 22% to $11.14, one of the largest single-day percentage declines since the company’s 2005 initial public offering. They have lost nearly half their value this year.

“We have to get through this temporary time that we’re in right now, get out on the other side,” Chief Executive

Patrik Frisk

said during a Friday earnings call.

The CEO said there is still demand for the company’s products and the brand is getting stronger. Executives said the company is raising prices in certain categories to counter increased shipping costs but that the full benefit of the move wouldn’t be recognized until next year.

Overall sales in the quarter ended March 31 rose 3% to $1.3 billion, just short of expectations from analysts polled by FactSet. Apparel sales rose 8%, while sales of footwear fell 4% and accessories revenue fell 18%. Revenue from the Asia-Pacific region was down 13.5%, which the company attributed to Covid-19 restrictions in China and retail-store closures.

Under Armour reported a loss of $59.6 million, or 13 cents a share, compared with a profit of $77.7 million a year earlier, or 17 cents a share. On an adjusted basis, Under Armour said its loss was 1 cent a share. Analysts recently polled by FactSet had forecast a profit of 4 cents.

The sportswear maker recently completed a transition quarter as part of changing its fiscal calendar. The company said it didn’t expect to see improvements in its business until the back half of the current fiscal year, which ends in March 2023.

Executives said the company has been canceling orders from vendors and customers as a way to deal with capacity issues and shipping delays from Covid-related restrictions in China. The move has affected the company’s revenue growth and will heavily impact the first half of fiscal 2023, Chief Financial Officer

David Bergman

said on the call.

Mr. Frisk said the company hasn’t canceled orders because of a lack of demand.

The company said it is betting that Covid-related impacts in China would lessen as the year progresses. Executives said they also believe the company’s footwear category would grow faster than apparel during this fiscal year, but they didn’t break down growth by channel.

“We feel good about growth going forward, and also we feel good about an ability to continue to grow our margins back again,” Mr. Frisk said.

For the current year, Under Armour expects sales to rise 5% to 7% from a year ago and per-share earnings of 79 cents to 84 cents.

Adjusted for tax allowance and restructuring costs, the company said per-share earnings would come in between 63 cents and 68 cents, below the 78 cents forecast by analysts.

Write to Inti Pacheco at [email protected]