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May 1, 2018
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Under Armour forecasts bigger loss than expected as costs rise

By
Reuters
Published
May 1, 2018

Sportswear maker Under Armour Inc. forecast a bigger-than-expected loss for the second quarter on Tuesday, taking the shine off first-quarter sales that topped Wall Street estimates.


American sprinter Natasha Hastings features in Under Armour's "Will Finds A Way" campaign - Instagram: @underarmour


The company’s shares, which initially rose 4 percent in premarket trading, dipped 6.5 percent after Under Armour forecast a loss of between 9 and 10 cents per share for the quarter ending June, bigger than the 6-cent loss expected by analysts, according to Thomson Reuters I/B/E/S.

Under Armour has been spending heavily on marketing in recent months as its North America business that is responsible for 73 percent of overall revenue cools down after years of double-digit growth.

The Baltimore-based company has signed endorsement deals with celebrities such as Dwayne “The Rock” Johnson and has aggressively promoted its new Bluetooth-connected HOVR running shoes.

The company also said selling, general and administrative expenses would rise at a low double-digit percentage rate in the second quarter.

International sales remained a bright spot for Under Armour, rising 27 percent in the three months ended March 31 and helping make up for flat sales at the North America division.

Still, the rapid international expansion has some analysts concerned about Under Armour’s inventory levels, which jumped 27 percent to $1.1 billion in the first quarter.

“The combination of high (accounts) receivables and elevated inventory levels looks like a ticking time bomb to us,” Susquehanna Financial Group’s Sam Poser said in a report.

Under Armour, which lists basketball star Steph Curry and tennis player Andy Murray among its biggest sporting sponsorship deals, faces brutal competition from Nike Inc. and Germany’s Adidas AG, and Puma in the United States, where the bankruptcies of U.S. sporting goods retailers have also weighed on sales.

The company’s loss widened to $30.2 million in the first quarter from $2.3 million a year earlier, hurt by restructuring costs of $37.5 million.

Excluding one-time items, Under Armour broke even on a per-share basis, while analysts had expected a loss of 5 cents per share.

Net revenue rose 5.9 percent to $1.19 billion, topping expectations of $1.12 billion.

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