Under Armour swings to loss amid supply chain challenges

Under Armour posted an unexpected first-quarter loss and disappointing sales as it warned of a rough year ahead.

The athletic apparel company issued a weak outlook for fiscal 2023, citing order cancellations, supply chain delays and the impact of COVID-19 lockdowns in China. (Under Armour has canceled some orders to vendors due to capacity issues and supply chain challenges.)

Under Armour announced in February that it would be shifting its fiscal year from Dec. 31 to March 31. Following a three-month transition period (January 1 – March 31, 2022), Under Armour's fiscal year 2023 will run from April 1, 2022, through March 31, 2023. Consequently, there will be no fiscal year 2022.

The company posted a net loss of $59.6 million, or $0.13 per share, in the quarter ended March 31, compared to net income of $77.8 million, or $0.17 per share, in the year-ago period. Its adjusted loss was a penny per share.

CFO David Bergman told analysts that the company’s profit margins were pressured by elevated freight costs, with ocean freight costs coming in higher than expected. 

Revenue rose 3% to $1.301 billion from $1.257 billion last year. Apparel revenue increased 8 percent to $877 million. Footwear revenue decreased 4% to $297 million. Accessories revenue decreased 18% to $97 million.

In North America, sales increased 4%, to $841 million. International revenue inched up 1%, to $456 million.

"Having successfully executed a multi-year transformation and after delivering a record year in 2021 – we are continuing to serve the needs of athletes amid an increasingly more uncertain marketplace," said Under Armour president and CEO Patrik Frisk. "As global supply challenges and emergent COVID-19 impacts in China eventually normalize, we are confident that the strength of the Under Armour brand coupled with our powerful growth strategy positions us well to deliver sustainable, profitable returns to shareholders over the long-term."

For fiscal 2023, Under Armour is guiding for a revenue increase of 5% to 7% from the comparable baseline period of $5.7 billion, earnings per share of $0.79 to $0.84 and adjusted earnings of $0.63 to $0.68.