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UA Braces for Higher Inventories, Elevated Promo Environment

Under Armour’s Curry 4 FloTro basketball shoe.

Under Armour is steadfast in maintaining its annual revenue forecast of 5 to 7 percent growth despite a myriad of H2 headwinds that are expected to impact operating income and gross margin. The company is anticipating elevated inventory levels in the months ahead amid an overall promotional environment as issues such as higher freight costs and currency fluctuations persist. 

Nonetheless, Under Armour, expected to name a permanent president and CEO by year-end, intends to push forward with its core business strategy with accelerated focus on Direct-To-Consumer, international, women’s and footwear. Additionally, the company will aim to develop a line of attack that will develop broader consumer consideration for its brand, partially through more style and usage options that are not aligned with performance sports.

First quarter reported revenues were flat at $1.349 billion as period operating income slipped 72 percent to $34.5 million from $121.2 million. Gross margin fell 280 basis points to 46.7 percent on higher-than-planned promotions, supply chain impacts and currency valuation changes. Footwear sales, helped by a better-flowing supply chain, rose 1 percent to $347.3 million with solid performances from football and basketball, offset by declines in running. This fall, the brand will introduce a new footwear platform through a new technology in a training shoe that will eventually be expanded into other categories.