'Our third-quarter results reflect considerably better than expected performance due to higher demand and our strong execution, especially in
Third Quarter 2020 Review
Revenue was flat at
Wholesale revenue decreased 7 percent to
Apparel revenue decreased 6 percent to
Gross margin decreased 40 basis points to 47.9 percent compared to the prior year, driven primarily by negative impacts from COVID-19 related discounting and product mix partially offset by supply chain efficiencies and channel mix.
Selling, general & administrative expense was relatively unchanged from the prior year at
Restructuring and impairment charges were
Operating income was
Net income was
Diluted earnings per share was
Inventory was up 17 percent to
Cash and Liquidity
The company ended the third quarter with Cash and Cash Equivalents of
No borrowings were outstanding under the company's
Fiscal 2020 Outlook
Due to ongoing uncertainty related to COVID-19 and its potential effect on global markets, the company expects material impacts on its business results for the remainder of 2020 and into 2021. Key points related to
Revenue is expected to be down at a high-teen percentage rate compared to 2019 results, reflecting a low twenties percentage rate decline in
Expected year-end timing impacts from COVID-19, related to customer order flow and changes in supply chain timing resulting in more planned spring product deliveries in early 2021 versus late 2020.
An anticipated substantial decline in licensing revenue due to lower contractual royalty minimums and contract settlements realized in the prior year.
Lower planned excess inventory sales to the off-price channel.
Gross margin is expected to be up 20 to 40 basis points versus 2019 due to channel mix benefits and supply chain efficiencies, offset mainly by discounting related to COVID-19. For the fourth quarter, the company anticipates meaningful gross margin pressure primarily related to expectations around a more promotional environment relative to the prior year.
Operating loss is expected to reach approximately
Adjusted interest and other expense net is planned at approximately
Adjusted diluted loss per share is expected to be in the range of
Inventory is expected to be up approximately 10 percent at the end of 2020.
Capital expenditures are planned at approximately
COVID-19 Update
MyFitnessPal Platform Sale Announcement
In a separate press release today, the company announced that it has entered into a definitive agreement to sell the MyFitnessPal platform to
MyFitnessPal is currently reported within
Conference Call and Webcast
Non-GAAP Financial Information
This press release refers to 'currency neutral' and 'adjusted' amounts. Currency neutral financial information is calculated to exclude the impact of changes in foreign currency exchange rates. Management believes this information is useful to investors to compare the company's results of operations period-over-period. Adjusted financial measures exclude the impact of the company's 2020 restructuring plan and related impairment charges, impairments associated with certain long-lived assets and goodwill, and related tax effects. Management believes this information is useful to investors because it enhances visibility into its actual underlying results, excluding these impacts. Adjusted net loss and adjusted diluted loss per share also exclude the non-cash amortization of debt discount on the company's convertible senior notes, deal-costs related to the pending sale of MyFitnessPal and related tax effects. Management believes the non-cash portion of the interest expense, which represents the accretion of the bifurcated equity component of the convertible senior notes' conversion option, is not core to the company's operations given the intent and ability to settle in shares of the company's Class C common stock. Similarly, deal costs are not core to the company's operation given dispositions are infrequent and non-recurring in nature. These supplemental non-GAAP financial measures should not be considered in isolation and should be contemplated in addition to, and not as an alternative for, the company's reported results prepared per GAAP. Additionally, the company's non-GAAP financial information may not be comparable to similarly titled measures reported by other companies.
About
Forward Looking Statements
Some of the statements contained in this press release constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, the impact of the COVID-19 pandemic on our business, our plans to reduce our 2020 operating expenses, anticipated charges and restructuring costs, projected savings related to our restructuring plans and our planned sale of our MyFitnessPal platform and the timing thereof. In many cases, you can identify forward-looking statements by terms such as 'may,' 'will,' 'should,' 'expects,' 'plans,' 'assumes,' 'anticipates,' 'believes,' 'estimates,' 'predicts,' 'outlook,' 'potential' or the negative of these terms or other comparable terminology. The forward-looking statements contained in this press release reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to: the impact of the COVID-19 pandemic on our industry and our business, financial condition and results of operations; changes in general economic or market conditions that could affect overall consumer spending or our industry; changes to the financial health of our customers; loss of key suppliers or manufacturers or failure of our suppliers or manufacturers to produce or deliver our products in a timely or cost-effective manner; our ability to access capital and financing required to manage our business on terms acceptable to us; our ability to successfully execute our long-term strategies; our ability to successfully execute any potential restructuring plans and realize their expected benefits; our ability to effectively drive operational efficiency in our business; our ability to manage the increasingly complex operations of our global business; our ability to comply with existing trade and other regulations, and the potential impact of new trade, tariff and tax regulations on our profitability; our ability to effectively develop and launch new, innovative and updated products; our ability to accurately forecast consumer demand for our products and manage our inventory in response to changing demands; any disruptions, delays or deficiencies in the design, implementation or application of our new global operating and financial reporting information technology system; increased competition causing us to lose market share or reduce the prices of our products or to increase significantly our marketing efforts; fluctuations in the costs of our products; our ability to further expand our business globally and to drive brand awareness and consumer acceptance of our products in other countries; our ability to accurately anticipate and respond to seasonal or quarterly fluctuations in our operating results; our ability to successfully manage or realize expected results from acquisitions and other significant investments or capital expenditures; risks related to foreign currency exchange rate fluctuations; our ability to effectively market and maintain a positive brand image; the availability, integration and effective operation of information systems and other technology, as well as any potential interruption of such systems or technology; risks related to data security or privacy breaches; our potential exposure to litigation and other proceedings; and our ability to attract key talent and retain the services of our senior management and key employees. The forward-looking statements contained in this press release reflect our views and assumptions only as of the date of this press release. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
See detailed results at: https://about.underarmour.com/investor-relations/news-events-presentations/corporate-news/id/21821
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