Under Armour Inc (ticker: UA, UAA) investors got some much-needed good news this week when the company reported slightly better-than-expected earnings and revenue in the first quarter. Under Armour shares initially jumped nearly 10 percent on the news, but the company still faces a number of headwinds competing in the athleisure market in years ahead.
Under Armour reported its first-ever quarterly net income loss at 1 cent per share. However, the loss and the $1.12 billion in revenue narrowly topped consensus analyst forecasts of an EPS loss of 4 cents on $1.11 billion in revenue.
Sales were up 7 percent from last year.
The positive market reaction to relatively pedestrian top and bottom-line numbers is a clear indication that expectations were extremely low.
“By proactively managing our growth to deliver superior innovative product, continuing to strengthen our connection with customers and increasing our focus on operational excellence, we have great confidence in our ability to drive toward our full-year targets,” CEO Kevin Plank says in a statement.
Despite first-quarter numbers that were not as bad as feared, the earnings loss and single-digit revenue growth were both firsts for the company. In recent years, Under Armor stock soared on revenue growth that consistently trended around 30 percent. However, increasing competition from rivals Nike (NKE), Adidas, Lululemon Athletica (LULU) and others appears to have put a damper on Under Armour’s impressive growth.
Plank says sales of NBA star Stephen Curry’s basketball shoe were a particularly soft spot in the first quarter.
“While the [Curry 3] played very well on the court for Stephen Curry and our athlete, a sluggish signature market and a warm consumer reception led to softer-than-expected results,” Plank says.
Credit Suisse anticipated struggles for Under Armour in the footwear space before Plank’s comments.
“Undefined segmentation for premium footwear, inconsistent pricing and a more challenged outlook for basketball product give us pause,” the firm says.
Still, Jefferies analyst Randal Konik says the company’s first-quarter report and guidance were good enough to reaffirm the company’s solid position in a growing market.
“UAA is one of the few brands that matter in the athletic space,” Konik says. “We believe this brand is here to stay.”
Despite the single-digit revenue growth, Under Armour reiterated…
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