Under Armour’s Stock Is Surging After Its Profits Blow Past Forecasts, Will Sell MyFitness Pal

Samantha McDonald
·3 min read

Shares for Under Armour Inc. climbed in Friday premarket trading on the heels of an earnings beat — driven by the sales of its sneakers and workout gear — and a more upbeat outlook, plus the announcement of the sale of its MyFitnessPal platform.

For the third quarter ended Sept. 30, the sportswear giant posted adjusted earnings of 26 cents per share and an adjusted income of $118 million. Analysts had anticipated earnings of 5 cents per share. Revenues, on the other hand, remained flat at $1.4 billion but still bested Wall Street’s expectations of $1.13 billion.

As of 8:30 a.m. ET, its stock was up more than 6% to $14.63.

“Our third-quarter results reflect considerably better than expected performance due to higher demand and our strong execution, especially in North America,” president and CEO Patrik Frisk said in a statement. “We believe that the critical mass of our transformational challenges is behind us, and we remain sharply focused on operational improvements and financial discipline to accelerate strategies to create sustainable, long-term growth for the Under Armour brand and our shareholders.”

The Baltimore-based chain shared that revenues in its home turf of North America fell 5% to $963 million Meanwhile, international sales advanced 18% to $433 million — with a 31% rise in the Europe-Middle East-Africa region, 15% improvement in the Asia-Pacific and a 15% dip in Latin America.

Its wholesale business decreased 7% to $830 million, while its direct-to-consumer revenues increased 17% to $540 million. Although apparel sales sank 6% to $927 million, Under Armour’s footwear revenues surged 19% to $299 million and accessories revenues jumped 23% to $145 million.

What’s more, the athletic clothing and shoe brand announced that it had entered into an agreement to sell MyFitnessPal to Francisco Partners. The transaction, which is expected to close in the fourth quarter, is valued at $345 million, inclusive of the achievement of potential earn-out payments and subject to working capital and other customary adjustments. (Investors had bemoaned UA’s hefty investments in wearable tech and other workout innovations for several years).

“This announcement reduces the complexity of our consumer’s brand journey by empowering sharper alignment with our long-term digital strategy as we work towards a singular, cohesive UA ecosystem,” Frisk said. “Additionally, it affords us investment flexibility to drive greater return and value to our shareholders over the long run.”

At the end of the three-month period, the company had cash and equivalents that amounted to $866 million. No borrowings were outstanding under its $1.1 billion revolving credit facility.

Due to ongoing uncertainties surrounding the COVID-19 pandemic, Under Armour expects material impacts on its financial results for the remainder of the year and heading into 2021. It predicts revenues to be down at a high-teen percentage rate, reflecting a low-20s percentage rate decline in North America and a high-single-digit percentage rate drop within its international business.

However, for the fourth quarter, the company now forecasts revenues to be down at a low-teen percentage rate, compared with the previous down 20% to 25% expectation. (It added that nearly all locations where its products are sold are back in business.)

“In the company’s owned and operated retail stores, traffic trends remain challenged; however, conversion trends remain strong,” Under Armour shared. “The fourth quarter and full-year outlook provided today assume the vast majority of retail locations where Under Armour is sold will continue to remain open and operate under similar health and safety requirements for the remainder of the year.”

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