May 2, 2019 / 11:28 AM / in 19 days

Under Armour lifts profit forecast as international sales shines

(Reuters) - Under Armour Inc raised its full-year earnings forecast after quarterly results beat estimates on Thursday, propped up by higher sneaker sales in international markets and an improvement in its sluggish North America business, sending shares up as much as 9 percent.

FILE PHOTO: The ticker symbol and company logo for Under Armour, Inc. is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 22, 2019. REUTERS/Brendan McDermid

The company has launched premium products such as HOVR running shoes and mineral-infused clothing line Rush in efforts to get customers to switch from sneaker giants Nike Inc and Adidas AG.

Under Armour has also been expanding its international business through new stores, primarily focusing on the Asia-Pacific region, as it looks to cushion itself from stagnating sales in its home market.

At the same time, the company is reducing inventories to be able to sell more of its apparel at full price after years of discounting.

Sales in North America fell 3 percent, but performed far better than Wall Street’s expectation of a 5.5 percent decline, according to brokerage Bernstein.

“We’ve stabilized this region ... And we clearly see that when we’re providing newness into the channels, it works really well for us,” Chief Operating Officer Patrik Frisk said on a post-earnings call.

The company’s smaller-than-expected decline in North America sales compares with a 7 percent surge that Nike reported in its quarterly results in March.

Under Armour’s international revenue rose 12 percent, with Asia Pacific driving the gains.

The company said sales in its main apparel business rose 1 percent, while its smaller footwear business registered an 8 percent rise, driven by new launches.

The company reported a net income of $22.5 million, or 5 cents per share, in the quarter ended March 31, compared with a loss of $30.2 million, or 7 cents per share, a year earlier, when the company recorded restructuring charges.

Analysts on average were expecting the company to break even, according to IBES data from Refinitiv.

“The SG&A management was better than expected, which led to the more substantial operating profit beat,” Berstein analyst Jamie Merriman said.

The upbeat quarterly results prompted the company to raise profit forecasts. It now expects profit of 33 cents to 34 cents per share for the year, up from a previously expected range of 31 cents to 33 cents.

Net revenue rose 2 percent to $1.20 billion and edged past analysts’ average estimate of $1.18 billion.

Under Armour’s shares were up 4.5 percent at $23.02, adding to a near 25 percent gain this year.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Shinjini Ganguli

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