Under Armour (NYSE: UAA) swung to a profit in the first quarter of 2019 from a loss last year, helped by lower costs and expenses. The results exceeded analysts’ expectations. The company raised its earnings guidance for the full year 2019.
Net income was $22.48 million or $0.05 per share compared to a loss of $30.24 million or $0.07 per share in the previous year quarter. The latest quarter results were driven by product cost improvements, regional mix and prior period restructuring charges, offset by channel mix.
Revenue inched up 2% to $1.2 billion. Wholesale revenue increased 5% while direct-to-consumer revenue was down 6%, representing 27 percent of total revenue.
Apparel revenue inched up 1%. Footwear revenue grew 8% primarily driven by strength in its run category. Accessories revenue fell 11% primarily due to planned lower sales of backpacks and bags related to a strategic relaunch of a key product.
Looking ahead into fiscal 2019, the company still expects revenue growth of about 3% to 4% on flat results for North America and a low double-digit percentage rate increase in the international business. The earnings guidance is lifted to the range of $0.33 to $0.34 per share from the prior range of $0.31 to $0.33 per share.
For fiscal 2019, gross margin is now expected to increase about 110 to 130 basis points compared to 2018. The company now expects adjusted gross margin to increase about 70 to 90 basis points compared to 2018 due to ongoing supply chain initiatives and channel mix benefits. Operating income estimates are narrowed to the range of $220 million to $230 million from the prior range of $210 million to $230 million.
The company lowered its interest and other expenses outlook for fiscal 2019 to about $35 million from the prior expectations of $40 million. The effective tax rate is now predicted to be at the high end of the 19% to 22% range. Capital expenditures are anticipated to be about $210 million.
For the first quarter, revenue from North America declined by 3% to $843 million while the international business grew by 12%, representing 27% of total revenue. Within the international business, revenue was up 3% in EMEA, up 25% in Asia-Pacific, and up 6% in Latin America.
The class A shares of Under Armour ended Wednesday’s regular session down 4.59% at $22.04 on the NYSE. Following the earnings release, the stock inched up over 4% in the premarket session.