(Reuters) – Under Armour Inc forecast annual sales and profit below Wall Street expectations on Tuesday in a sign that persistent inflation was hampering demand and higher discounts were eating into profit margins, sending its shares down 5% before the bell.

As recession fears grow in the United States, cost-conscious consumers have been restricting their spending on discretionary products such as home goods, apparel and electronics to focus more on essentials.

The apparel maker’s results were in contrast to rival Nike Inc (NYSE:NKE) and industry peer Lululemon Athletica (NASDAQ:LULU) Inc, who have seen a steady demand for their products in the recent quarter despite an inventory glut.

Gross margins declined 310 basis points to 43.4% as the company offered higher discounts and promotions to get rid of surplus products.

Revenue in the fourth quarter topped estimates, helped by a 3% jump in its largest market, North America, while Asia Pacific revenue surged 31% on currency neutral basis.

Footwear sales jumped 27%, while apparel rose just 1% and accessories fell 1%.

The company expects fiscal 2024 net sales to be flat to slightly up, compared with analysts expectations of 3.7% growth.

Under Armour (NYSE:UA) also expects diluted earnings per share to be between 47 cents and 51 cents in 2024. Analysts were expecting a profit of 61 cents, according to Refinitiv data.

Its net revenue rose 7.5% to about $1.40 billion in the quarter ended March 31 compared with analysts’ average estimate of $1.36 billion.