Under Armour Inc UAA FY2024 Analysis Report

Executive Summary

This comprehensive analysis examines Under Armour Inc (UAA) for the fiscal year 2024, highlighting key financial performances, structural changes, and strategic implications. The company experienced a decline in net income compared to the prior fiscal year, primarily driven by operational challenges and increased expenses. Despite a robust revenue base, margins have compressed, and liquidity ratios indicate moderate leverage levels. The company’s strategic initiatives and market conditions suggest cautious optimism for the medium term, although near-term headwinds remain.

Management Discussion and Analysis (MD&A)

Under Armour’s FY2024 results reflect a revenue of $5.701 billion, representing a slight decrease from $5.903 billion in FY2023. The gross profit declined marginally to $2.630 billion from $2.640 billion, indicating pressure on margins amid competitive market dynamics. Operating expenses remained elevated, primarily due to general and administrative costs, which together with selling and marketing expenses, contributed to an operating loss of $185 million. Net income from continuing operations turned negative at approximately $232 million, with EPS at $0.53, down from $0.87 a year earlier. The company’s strategic focus on brand revitalization and operational efficiencies is ongoing, but short-term profitability remains under pressure.

Income Statement Analysis

Revenue and Gross Profit

Revenue for FY2024 was $5.701 billion, down 3.4% YoY from FY2023’s $5.903 billion. Gross profit declined slightly to $2.630 billion, yielding a gross margin of approximately 46.2%. The slight revenue contraction reflects challenging market conditions and competitive pressures in the athletic apparel sector.

Operating and Net Income

Operating expenses totaled $2.400 billion, leading to an operating loss of $185 million. After accounting for other expenses and taxes, net income from continuing operations was a loss of $232 million, compared to a profit of $374 million in FY2023. The net income decline underscores margin compression and increased operational costs.

EPS & YoY, QoQ Trends

EPS decreased from $0.87 in FY2023 to $0.53 in FY2024, reflecting the earnings pressure. Sequentially, the company’s net income showed signs of stabilization but remained below prior-year levels, indicating ongoing challenges in maintaining profitability.

Balance Sheet Analysis

Liquidity and Cash Position

Cash and cash equivalents stood at $858.7 million in FY2024, down from $711.9 million in FY2023, suggesting improved liquidity. Net debt decreased to approximately $584 million from $809 million, reflecting debt repayments and cash flow management.

Receivables, Inventory, and Assets

Accounts receivable slightly increased to $757 million, while inventory remained stable at around $958 million. Total assets declined marginally to roughly $4.76 billion from $4.95 billion, with a reduction in current assets balanced by asset depreciation.

Liabilities and Equity

Total liabilities increased to approximately $2.61 billion, primarily due to long-term debt ($1.44 billion) and deferred revenue obligations. Shareholders’ equity remained strong at over $2.15 billion. Liquidity ratios such as current ratio stood at approximately 2.45, indicating adequate short-term solvency.

Cash Flow Analysis

Operating Activities

Operating cash flow was $353.97 million, a significant improvement over the prior year’s negative cash flow, driven by adjustments in working capital and non-cash expenses. However, net cash used in operating activities was negative $59.3 million due to working capital fluctuations.

Investing Activities

Capital expenditures amounted to approximately $150.3 million, primarily in property and equipment. Net cash used in investing activities was about $126.4 million, reflecting ongoing investments in infrastructure.

Financing Activities

Net cash used was approximately $180.8 million, mainly from debt repayment and share repurchases. The company repurchased $90 million of common stock and paid no dividends during the period.

Free Cash Flow & Debt

Free cash flow was approximately -$228 million, indicating cash consumption mainly due to capex and buybacks. Net debt decreased to about $584 million, supporting the company’s deleveraging efforts.

Ratios & DuPont Analysis

The decline in net margin and ROE reflects pressure on profitability amid market headwinds. Asset turnover improved slightly, indicating stable efficiency. The increase in equity multiplier suggests marginal leverage growth.

Risk Factors

Market volatility and intense competition in athletic apparel pose risks to revenue stability. Regulatory challenges, supply chain disruptions, and macroeconomic uncertainties, including inflation and consumer spending patterns, could impact financial performance. Operational risks include inventory management and brand perception, while financial risks involve leverage and liquidity constraints.

Notes & Additional Commentary

Unusual items include significant working capital fluctuations and one-time acquisition costs. The company’s strategic focus on digital transformation and brand repositioning may require further investment and could temporarily pressure margins. The decline in profitability is partly attributable to external market factors and internal restructuring efforts.

Investment Implications

Short-term opportunities include capitalizing on the company’s liquidity buffer and ongoing brand initiatives. Long-term risks involve sustained margin compression and competitive pressures. A balanced outlook suggests cautious optimism if operational efficiencies and market share growth are achieved. Investors should monitor debt levels, cash flow trends, and strategic execution.