Under Armour shares rose 20% in premarket trading Thursday after the sportswear giant raised its annual profit outlook, attributing this to reduced production costs and strategic cost-saving efforts, including fewer discounts in its stores and online.
Following several quarters of underperformance, founder Kevin Plank has returned as CEO to steer the company back on track. The plan focuses on boosting profitability by cutting headcount and trimming inventory on certain items.
Meanwhile, Under Armour and Nike are both revamping their strategies to drive demand and reclaim market share from newer brands like Roger Federer-backed On and Hoka by Deckers Outdoor. Under Armour is working to sell more items at full price, contributing to a 200-basis-point increase in its gross margin, now at 49.8%.
Danni Hewson, head of financial analysis at AJ Bell, commented, "A successful athleisure strategy requires more than just smart pricing—it requires creating products that consumers are willing to buy without discount incentives."
Under Armour has raised its annual profit forecast to between 24 and 27 cents per share, up from its previous estimate of 19 to 21 cents. Excluding specific items, it posted a quarterly profit of 30 cents per share, surpassing analysts' expectations of 20 cents.
Despite these gains, Under Armour’s North American sales fell by 12.9%, and the Asia-Pacific market reported a 10.5% decline due to weaker demand in China. Overall, second-quarter net sales declined 10.7% to $1.40 billion, slightly better than analysts' projection of a 11.6% drop to $1.39 billion.
