By Savyata Mishra
(Reuters) -Under Armour posted a surprise first-quarter profit on Thursday on margins boost from selling its sports apparel at full price and lower inventory at a time when consumers get picky with what they spend their dollars on.
Its shares surged 18% in early trading as the company also raised its annual profit forecast.
The retailer is looking to turn around its business by cutting promotions, inventory and workforce, while focusing on selling more higher-margin items such as men's apparel.
As a result, gross margins expanded 110 basis points to 47.5% and inventory dropped 15% to $1.1 billion.
"The company is better situated selling less and charging more. It's early but the improvement in profitability this quarter is suggesting the first steps of this reset are working," BMO analyst Simeon Siegel said.
CEO Kevin Plank said the share of full-price products being sold online rose significantly.
"We're optimistic about initial performance metrics, which include higher average order values," he said, adding that the company was "even less promotional than planned".
But despite its efforts, quarterly revenue from its biggest North America market fell 14% as inflation stretched customer budget, while revenue from international business fell 2%.
Its first-quarter revenue dropped 10% to $1.18 billion smaller than a nearly 13% decline analysts had anticipated.
On an adjusted basis, it earned 1 cent per share compared with LSEG estimates of an 8 cents loss.
Under Armour (NYSE:UA) expects fiscal 2025 adjusted earnings per share between 19 cents and 22 cents, slightly above its prior expected range of 18 cents to 21 cents.
It now expects a slightly lower decline in North America revenue in the range of 14% to 16% from a prior view of a 15% to 17% drop.