Under Armour boosts forecasts as customers buy more at full price

Under Armour Inc (UAA.N) raised its annual forecasts after beating estimates for quarterly results, as it sells more athletic apparel and footwear directly to consumers at little to no discounts, sending its shares up 5%.

Sales at sportswear makers, including Nike (NKE.N) and Adidas AG (ADSGn.DE), have been rising as customers turn to healthy living and outdoor experiences such as hiking and jogging.

Under Armour has cashed in on the demand, sharpening its focus on full-price sales at its brick-and-mortar and online stores and is planning to pull out of 2,000 to 3,000 discount-heavy wholesale outlets to increase its profit margins.

Baltimore-based Under Armour, which has expanded its product lines backed by actor Dwayne Johnson and National Basketball Association’s Stephen Curry, has also been investing more in marketing to boost its brand image and tackle competition from Lululemon Athletica (LULU.O) and Nike.

“When we come out of this pandemic, we’re going to be ready for growth,” Chief Executive Patrik Frisk told analysts.

Under Armour raised its 2021 forecast for adjusted earnings per share (EPS) to between 50 cents and 52 cents from 28 cents to 30 cents. It also expects revenue to rise in low-20s percentage, compared with a high-teen percentage forecast earlier.

Analysts expect EPS of 35 cents and revenue growth of 19.5%.

“UA is a prime example of a company that used a ‘COVID-Cover’ to refashion its business for multi-year success and return to under-promising and over-delivering,” BMO Capital Markets analyst Simeon Siegel said.

Under Armour, however, flagged supply chain issues due to COVID-19 resurgence, particularly in Vietnam, which accounts for about a third of its footwear and apparel supply.

The company’s second-quarter net revenue rose 91% to $1.35 billion compared with estimates of $1.21 billion. Excluding items, Under Armour earned 24 cents per share, crushing Refinitiv IBES estimate of six cents.