What happened
Under Armour's (UA -1.18%) (UAA -0.83%) shares were up 11.7% as of 12:27 p.m. ET on Thursday after the apparel company reported earnings results for its fiscal second quarter before the trading session opened. For the period, which ended Sept. 30, it beat revenue and earnings estimates, and the guidance it issued for the current quarter was also head of expectations.
The better-than-expected financial performance gave traders justification to bid up the stock, which is still down by around 68% over the last year. However, not everything in the report was a green light for investors. Management's forecast for the current quarter actually reflected a cut to its previous guidance.
So what
Under Armour reported revenue growth of 5% year over year on a constant-currency basis. A decline in sales of apparel and accessories was offset by a 14% increase in footwear revenues. This was notably better than Nike's 12% year-over-year increase in footwear sales in its August-ending quarter.
Higher operating expenses are still putting pressure on Under Armour's profits. Its operating margin fell to 7.6%, down from 11.1% in the year-ago quarter.
Now what
Management lowered its full-year outlook based on elevated levels of inventory and discounting, which have also hurt Nike's performance. For the fiscal year, Under Armour now expects revenue to grow at a low single-digit percentage rate compared to the previous expectation for growth of 5% to 7%.
With softer trends still in play for the consumer discretionary space, investors shouldn't look at this company's earnings beat as a strong signal to buy the stock, especially since Under Armour is still in turnaround mode and searching for a new CEO after the company announced a leadership transition in May.
