Under Armour Executives Say Supply Chain Headwinds Are a ‘Temporary Speed Bump’

Under Armour shares fell this morning — even after the company posted record sales and earnings for 2021.

In its earnings announcement, the company warned of potential headwinds in future quarters due to supply chain constraints. Under Armour said it expects revenue to grow at at a mid-single-digit rate in Q1, factoring in 10 percentage points of headwinds from supply chain constraints that will impact merchandise for the spring and summer.

Shares of the company were down more than 9% on Friday morning on the news.

“As we navigate ongoing uncertainty in the marketplace, we remain focused on delivering industry-leading innovations, premium experiences, and empowering those who strive for more,” said Under Armour president and CEO Patrik Frisk in a statement.

The company also expects to see “negative impact due to higher freight expenses” due to ongoing challenges related to COVID-19, which executives expect to last through the next two quarters. The decision to use air freight, managing director of GlobalData Neil Saunders said, “protects supply and the customer experience” but could also hurt profitability if the sales don’t measure up.

Despite the challenges, Under Armour still reported strong numbers for the fourth quarter and the full year of 2021. The athletic retailer reported a net income of $110 million in Q4, with an adjusted net income of $67 million. Diluted earnings per share were $0.23, with adjusted diluted earnings per share were $0.14. Revenue was up 9% year over year to $1.5 billion. Overall, the company saw record earnings and revenues in 2021.

Executives maintained that supply chain headwinds will not deter the company from delivering strong numbers in 2022.

“We believe these COVID-related supply chain pressures are just a temporary speed bump on our road to continued profitable growth over the long term,” said CFO David Bergman in a call with investors.

Frisk described the headwinds as a “short-term speed bump” that won’t impact the overall upward trajectory of the company.

We feel that our playbook is working,” Frisk said. “We see in our metrics in terms of both awareness, consideration and engagement from the consumer that we continue to get stronger. [We’re] feeling very good about athletic, feeling very good about the Under Armour brand and the trajectory we’re on right now.”

Given the strong results in Q4 and 2021 overall, analysts also expressed confidence in the retailer’s ability to deliver strong results in 2022.

“We view the underlying performance as a positive sign that UAA can meet/exceed consensus estimates in upcoming quarters as headwinds ease,” wrote Baird analyst Jonathan Komp in Friday note.

BMO analyst Simeon Siegel also maintained confidence in Under Armour. The company, he wrote, is “emerging healthier than pre-pandemic and we see ongoing upside from here.”

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