under protectionit is (AU 4.92%) (UAS 4.28%) Shares were up 11.7% as of 12:27 a.m. ET Thursday after the apparel company announced its fiscal second-quarter results before the open of trading. For the period, which ended Sept. 30, it beat revenue and earnings estimates, and the guidance it released for the current quarter also beat expectations.
The better-than-expected financial performance gave traders justification to push the stock higher, which is still down about 68% from a year ago. However, not everything in the report was a green light for investors. Management’s forecast actually reflected a reduction from its previous forecast.
Under Armor reported revenue growth of 5% year-over-year at constant currencies. A decline in apparel and accessories sales was offset by a 14% increase in footwear revenue. It was much better than Nikethe 12% year-over-year increase in footwear sales in the quarter ending August.
Rising operating costs continue to put pressure on Under Armour’s earnings. Its operating margin fell to 7.6% from 11.1% in the year-ago quarter.
Management lowered its full-year outlook due to high levels of inventory and discounts, which also hurt Nike’s performance. For the fiscal year, Under Armor now expects revenue to grow at a low single-digit percentage rate compared to the previous expectation of 5% to 7% growth.
With softer trends still in play for the consumer discretionary space, investors shouldn’t take this company’s earnings as a strong signal to buy the stock, especially as Under Armor is still in recovery mode. and looking for a new CEO after the company announcement. a leadership transition in May.
John Ballard has no position in the stocks mentioned. The Motley Fool has positions in and recommends Nike and Under Armor (C Shares). The Motley Fool recommends Under Armor (A shares). The Motley Fool has a disclosure policy.