Under Armour cuts profit forecast as higher costs, discounts hit margins

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Apparel makers have in recent months sounded the alarm on an expense surge driven by rising prices of raw materials from cotton to resin, COVID-19 flare-ups in manufacturing hub China and the fallout from the Russia-Ukraine war.

That hit has been worsened by the need to offer more discounts to customers who have curbed spending on discretionary items in the face of decades-high inflation.

Under Armour (NYSE:UA) said on Wednesday it now expects fiscal 2023 gross margins to drop by up to 425 basis points, compared with as much as 200 basis previously, as it also takes a hit from the dollar surge.

A stronger greenback typically eats into the profits of companies such as Under Armour that have sprawling global operations and convert foreign currencies into dollars.

Annual adjusted profit is expected to be between $0.47 and $0.53 per share, compared with a previous forecast of $0.63 to $0.68 per share. The forecast cut follows a similar move by German rival Adidas (OTC:ADDYY).

Still, Under Armour’s shares were 1.6% higher in premarket trading as an easing of supply chain bottlenecks helped the company beat first-quarter revenue estimates.