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Under Armour reports record turnover and profits – but says supply chain challenges ahead will hit profits

The effect of Covid-19 related supply chain issues will affect Under Armour profits in the coming months. Image courtesy of Under Armour

Under Armour today reports ‘record’ turnover and profits after a year in which it stayed focused on its operations and the needs of its customers. But it warns that in the months ahead, profitability will be affected by supply chain challenges.

Full year performance

The sportswear brand, ranked Top250 in RXUK Top500 research, has reported full-year revenues of $5.7bn (£4.2bn) for its 2021 financial year. That’s 27% up on the same time last year. Direct to consumer sales grew by 26% to $2.3bn (£1.7bn), thanks to a strong performance both in its own stores and on its own website. Ecommerce accounted for 39% of its direct to consumer sales, having grown by 4% during the year.

Wholesale remains the larger part of the business, having grown by 36% to $3.2bn (£2.4bn) during the year.

Sales in its domestic North America market grew by 29% to $3.8bn (£2.8bn) , while its international sales were 34% up at $1.9bn (£1.4bn). Sales in the EMEA region, which includes the UK, grew fastest (+41%), followed by Asia Pacific (+32%) and Latin America (+14%). Clothing sales of $3.8bn (£2.8bn) grew by a third (+33%), while footwear (+35% to $1.3bn/£0.96bn)) and accessories (+12% to $462m/£341.9m) sales also grew quickly.

Net income – a US measure of profitability – for the full-year came in at $360m (£266m).

Fourth quarter figures

In the fourth quarter, revenues of $1.5bn (£1.1bn), were 9% up on the same time last year, with turnover in the EMEA region up by 23%, when the effects of currency fluctuations were stripped out. During the period, direct to consumer revenue grew 10% to £720m (£532.7bn), including 4% growth in ecommerce sales, which accounted for 42% of its direct-to-consumer business. Wholesale revenues of $768m (£568m) were 16% ahead of the previous year. Net income came in at $110m (£81.4m).

“The final quarter of 2021 demonstrated the power and consistency of Under Armour’s strategic playbook, which allowed us to capitalise on improving brand strength and consumer demand,” says Under Armour president and chief executive Patrik Frisk. “By staying hyper-focused on operational excellence and serving the needs of athletes, we were able to deliver record revenue and earnings results for the full year.”

Supply chain challenges ahead

Looking ahead, the brand now expects revenues to grow by mid single digit rates in the coming quarter, which will be a transitional one as the brand is changing its financial year to run from April 1 to March 31 – starting in April. It says that supply constraints related to the Covid-19 pandemic are expected to mean a reduction in orders for the spring/summer range. Gross margins are also expected to fall by 200 basis points on the previous year, including about 240 basis points as a result of higher freight expenses from Covid-19 related issues. It expects operating income to come in at between $30m (£22.2m) and $35m (£25.9m).

“Amid a dynamic environment with ongoing Covid-19 impacts and resultant supply chain headwinds, I am proud of how consistently our global teams continue to execute our plan,” Frisk says. “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. Going forward, I am confident that we are running a stronger company – one that is able to deliver sustainable, profitable growth and value creation for our shareholders over the long term.”

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