Under Armour forecast full-year profit below estimates on Friday, as the sportswear maker grapples with higher transportation costs and a hit to its business from renewed COVID-19 curbs in China.
Shares of Under Armour tumbled over 21% in premarket trading, as the company also reported a surprise loss and bleak sales in the first three months of the year.
While economies around the world are reopening, a spike in COVID-19 infections in parts of the world such as China has led governments to reinstate strict social restrictions once again, hurting manufacturing operations and retail sales.
The Baltimore-based company said the curbs led to a 14% fall in revenue from the Asia-Pacific region in the quarter ended March 31, mirroring a sales slump reported by larger German rival Adidas, which also trimmed its 2022 targets earlier on Friday.
Under Armour generated about 15% of its revenue from the Asia-Pacific region last year.
Shipping delays and labor shortages have also pressured the company’s ability to get products to stores, forcing it to cancel orders.
“Supply chain pressures seem more a function of transportation pressure and elevated freight costs, rather than an issue of availability… Supply exists, getting it has been difficult,” said BMO Capital Markets analyst Simeon Siegel.
Under Armour projected an adjusted per-share profit between 63 cents and 68 cents for fiscal year 2023, below Refinitiv estimates of 83 cents.
It sees 5%-7% growth in sales, while analysts expect a 5.4% increase.
For the period ended March 31, Under Armour reported a loss of $59.6 million, or 13 cents a share, compared with a profit of $77.7 million a year earlier, or 17 cents a share.
On an adjusted basis, the company reported a loss of 1 cent per share in the quarter, compared with estimates for a 6-cent profit, while net revenue rose 3% to $1.30 billion, but missed estimates.
“Overall, the 1Q22 miss and lower FY23 (profit forecast) are disappointing and put into question the progress the company made last year on improving the brand and profitability,” Telsey Advisory Group said.
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