Breaking Down Under Armour's Q2 Earnings

Shares of Under Armour UAA climbed 4.8 percent Thursday after the sports apparel company reported better-than-expected second quarter revenue growth. Under Armour also posted an adjusted quarterly loss and said its restructuring costs will be higher than it initially anticipated.

Quick Q2 Overview

Under Armour's Q2 revenues jumped roughly 8 percent to hit $1.17 billion, which topped our Zacks Consensus Estimate of $1.15 billion. However, the Baltimore-based company reported a total quarterly loss of $95.5 million, with $79 million coming from restructuring and impairment charges. Under Armour posted an adjusted loss of $0.08 per share, which matched our Q2 estimate.

Looking ahead, the company reaffirmed its fiscal 2018 adjusted earnings guidance to come in between $0.14 and $0.19 per share, with the high-end above our current $0.19 estimate. Under Armour expects its top line to climb by approximately 3-4 percent, which the firm noted would reflect international expansion of around 25 percent and a low to mid-single digit decline in North America.

The Good

Under Armour's direct-to-consumer business hit $414 million in the second quarter, which marked a 7 percent jump and represented 35 percent of global revenues. This is a step in the right direction as the company bolsters its e-commerce unit in order to adapt in a new retail age. The firm, like several of its competitors, has started to focus more on its own stores and online sales as Amazon.com, Inc. AMZN dries up some traditional retail business from Dick's Sporting Goods Inc DKS and others.

Investors will also likely be pleased to note that Under Armour saw its revenues outside of North America surge 28 percent to hit $302 million. Europe, the Middle East, and Africa revenues climbed 31 percent to $136 million, while the Asia-Pacific region jumped 34 percent to touch $126 million.

The Bad

Under Armour saw its North American sales hit $843 million, which represented roughly 72 percent of the company's total second quarter revenues. Meanwhile, international sales accounted for just 26 percent — with connected fitness making up the remainder.

Wholesale revenues climbed by more than the direct-to-consumer business and accounted for over 60 percent of revenues. This is not necessarily bad, but the industry is headed in an e-commerce and direct-to-consumer direction, so investors likely want to see direct-to-consumer growth come in better than wholesale.

The company also said that it expects to incur between $190 million and $210 million of pretax restructuring and related charges in 2018, up from its February estimates that called for $110 million to $130 million.

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