Pre-Earnings Analysis: What to Expect from Under Armour in 1Q16
Revenue expectations from Under Armour in 1Q16
Under Armour (UA) is slated to declare its 1Q16 results on April 21, 2016. According to the Wall Street analyst consensus, the company is expected to post revenues of $1.04 billion in the quarter, an increase of 28.8% over 1Q15.
Under Armour expects higher revenue growth in 1H16, compared to the second half of the year. Its top-line growth is expected to be in the high 20s, which is in line with the Wall Street consensus on the projected revenue growth rate in 1Q16.
Under Armour’s (UA) sales are expected to see higher-than-average growth (IWP) in the Footwear category, its International segment, and its Connected Fitness business. With part of the NBA season (including the All-Star game) and the Super Bowl falling in the first quarter, footwear sales should benefit.
Under Armour has also continued to create brand excitement with the launch of its slew of connected fitness products, including its first smart shoe, at the Consumer Electronics Show in January. While it may be too soon for these events to make a significant impact on the upcoming quarterly release, they are likely to have a larger impact in the next three quarters.
In preparation for August’s Summer Olympics in Rio de Janeiro, Brazil, UA released several videos under its Rule Yourself campaign in February and March 2016. These videos feature Olympic champion swimmer Michael Phelps and Dutch soccer star Memphis Depay.
Currency impact
Adverse forex movements are likely to continue to take a bite out of UA’s top line. However, the impact is likely to be lower than that of its larger rival Nike (NKE), which derives about 55% of its sales from outside North America. Adverse currency movements stemming from a higher US dollar had a negative impact of 5% on Nike’s revenue in fiscal 3Q16. In contrast, Under Armour derived 87% of its revenue from North America in 2015.
VF Corporation’s (VFC) 2015 revenue rose by 1% in reported terms and 6% in currency-neutral terms to $12.4 billion. In 2015, VFC derived about 35% of its revenue from outside the US. However, Adidas (ADDYY) benefited from currency movements last year due to the lower euro, its reporting currency. Reported sales rose by 16% to 16.9 billion euros, while the increase was 10% in currency-neutral terms.
Browse this series on Market Realist: