Strong apparel, footwear sales send Under Armour profits soaring

Strong apparel, footwear sales send Under Armour profits soaring

Under Armour saw profit and sales soar in the first quarter, beating analysts’ estimates, but the market punished the athletic wear brand’s stock, which fell more than 7 percent on Thursday.

The Baltimore-based apparel maker attributed its strong performance in the quarter ended March 31 to demand for its “performance-based” athletic gear, the brand’s appeal among youth and the growing success of its forays into outfitting hunting and fishing enthusiasts.

“We are off to a great start in 2014 driven by broad-based strength across our apparel, footwear, and international growth drivers,” founder and CEO Kevin Plank said in a statement.

Under Armour reported Thursday that its first-quarter profit jumped 73 percent to $13.5 million, or 6 cents per share, compared with $7.8 million, or 4 cents per share, a year ago. Results beat analysts’ earnings expectations of 4 cents per share.

Earnings per share reflect the company’s two-for-one stock split that took effect April 14.

Sales rose a robust 36 percent to $642 million from $472 million in the first quarter of 2013.

“The consumer desires and demands performance athletic wear, on the field or in training or going to the gym,” said Brad Dickerson, Under Armour CFO. “We stand a really good chance of capturing that demand because of the success of building our brand.”

Still, Under Armour shares slipped $4.02 each to $50.42 in New York Stock Exchange trading, after the company offered what some analysts saw as a conservative annual sales outlook. In its guidance, Under Armour said it expects 2014 net revenues in a range of $2.88 billion to $2.91 billion, a 24 percent increase.

That’s likely a conservative outlook, wrote Sterne Agee analyst Sam Poser in a report. The brand stands to benefit from accelerating international sales growth, more floor space at major retailers to accommodate more women’s, children’s and hunting products and stronger footwear sales.

The company should be able to sustain sales increases of at least 25 percent “for some time to come,” as it successfully links its brand to performance, expands internationally and covers a broad base of sports, Poser wrote. The brand has been growing in Europe and Asia and is branching into Latin America this year.

“The focus on making athletes better is resonating for [Under Armour] across many sports including the oldies such as football and baseball, but also in golf, tennis and soccer,” Poser said. “Outerwear and hunting are rapidly becoming meaningful sales drivers.”

And the future looks bright, he said, noting that Under Armour “is becoming the predominant brand in youth footwear and apparel. … As with Nike, over 30 years ago, we expect Under Armour to grow up with its young customers.”

Sales were strong across apparel, footwear and accessories categories. In apparel, a 33 percent increase was led by expanded offerings in areas such as golf, hunting, training, basketball and the women’s studio workout line, the company reported.

“Our formula for driving newness and innovation in apparel continues to resonate with consumers,” Plank said. “That same model is contributing to success in footwear, where we accelerated growth in running.”

Plank said the company has been able to translate its apparel sales formula into its eight-year-old footwear category. Footwear sales were up 41 percent.

And though footwear got a boost from the rollout of the company’s new Speedform Apollo running shoe, the growth came mainly from other styles as Under Armour has offered a wider assortment designs and price points, Dickerson said.

“Consumers walk in the door now, they have this choice in Under Armour they didn’t have before,” he said.

While newer advances such as Coldgear Infrared cold-weather gear are luring customers to stores, Charged Cotton shirts, pants and sweat shirts, billed as fast-drying and introduced a few years back, have proved particularly big sellers, Dickerson said.

The international market made up just 9 percent of the sportswear company’s sales in the first quarter but jumped nearly 80 percent on a year-over-year comparison. Under Armour has been adding stores in China and distribution channels in Taiwan and Hong Kong and this year will expand into Brazil and Chile. But Europe stood out as sales helped drive profit growth for the company as a whole.

“We’ve seen tremendous brand awareness in the U.K., Germany and France,” Dickerson said.