(Bloomberg) – Under Armor Inc. managed to reach more customers than expected last quarter, even with most of its stores closed, but the road ahead is bumpy.
The sporting goods maker’s second-half revenue is likely to decline 20-25%, with its recently improved gross margin under new pressure, executives warned in a call with analysts on Friday. Volatile stocks spiked in pre-trade after second-quarter earnings beat estimates, but abandoned earnings after the opening, falling as much as 7.3% to $ 10.61 in New York.
The company expects pressure on its gross margin in the second half of the year, and may not have enough inventory if sales recover faster than expected, executives on the call said.
That would be a drop in the second quarter in which Under Armor’s gross margin increased to 49.3% from 46.5% a year earlier. The company cited fewer off-price sales and more direct-to-consumer transactions as home-bound shoppers ordered online.
Second-quarter revenue fell 41% from a year earlier to $ 707.6 million, but that easily exceeded the highest estimate of $ 596 million, according to a Bloomberg survey of analysts.
The company responded to the Covid-19 slowdown “by amplifying Under Armor’s connection to our consumers through innovative digital activations” and “proactively managing our cost structure,” Chief Executive Patrik Frisk said in a statement.
The Baltimore-based company failed to address notices that founder Kevin Plank and Chief Financial Officer David Bergman received from the U.S. Securities and Exchange Commission last week, naming them in an investigation of the company’s accounting.
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