Investors didn’t like Under Armour Inc.’s fourth-quarter gross margin guidance, sending shares of the stock down 5.4 percent.
Shares on Thursday closed at $93.81 in Big Board trading.
The company on Thursday reported a 12.8 percent gain in profits for the third quarter ended Sept. 30, with net income at $100.5 million, or 45 cents a diluted share, from $89.1 million, or 41 cents, a year ago. Net revenues jumped 28.4 percent to $1.2 billion from $937.9 million. Helping revenues was a 61.4 percent spike in footwear sales to $196.3 million. By category, apparel sales rose 22.8 percent to $865.5 million in the quarter, while accessories rose 21.9 percent to $103.6 million. Licensing revenues and income comprised the balance of revenues for the quarter.
Kevin Plank, chairman and chief executive officer, said on the conference call to Wall Street analysts that the company would be celebrating its 10th anniversary as a public firm in three weeks. He also recapped expansion plans, such as the new category for Under Armour Sportswear. He noted the algorithmic capability of the Connected Fitness platform to help the company better engage with its consumers.
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The company upped 2015 guidance, with revenue now projected at $3.91 billion, or a 27 percent increase over 2014, compared with earlier forecasts of $3.84 billion, and operating income now at $408 million, a 15 percent gain over 2014, versus prior guidance at between $405 million to $408 million.
What didn’t sit well with investors was the update for the fourth quarter. Brad Dickerson, chief financial officer, said during the conference call that gross margin is “now expected to decline approximately 100 basis points during the fourth quarter. Some of the themes impacting our business the past few quarters will extend into the fourth quarter, including pressure from the continued strength of the U.S. dollar, higher freight costs and a higher mix of footwear revenues.”
He said that the company is planning on 2016 net revenues to grow by 25 percent and operating income to grow by 23 percent.