25 Oct Under Armour profit up 27 percent in third quarter
Under Armour’s profits jumped 27 percent in the third quarter, with higher athletic apparel sales led by products designed to be worn during workouts in cold or rainy weather.
Last Thursday, the Baltimore-based athletic apparel and footwear brand reported income of $73 million for the three months ended Sept. 30, up from $57 million a year earlier. Earnings per share rose from 54 cents a year ago to 68 cents, topping Wall Street analysts’ estimates of 66 cents.
Yet investors still punished Under Armour’s stock, which fell $4 a share to close at $79.98 each, reflecting high expectations for the company’s growth.
Sales rose 26 percent to $723 million in the July-to-September period.
“We have a consistent formula that is driving success across our business: deliver newness and innovation and the consumer responds,” said Kevin Plank, Under Armour’s founder, chairman and CEO, in a statement.
The strategy has helped drive revenue growth of more than 20 percent for the past 14 quarters, he said.
The company introduced ColdGear Infrared, designed to absorb and retain body heat, during the third quarter. It also launched a limited release of its Speedform running shoes, designed to be lightweight with a seamless fit, offering “a glimpse of where we can take footwear and redefine fit in the category,” Plank said.
Apparel revenue increased 26 percent to $561 million, compared with $445 million in the third quarter of 2012, the company reported. The increase, strong both through wholesale partners such as Dick’s Sporting Goods as well as in e-commerce and Under Armour-branded stores, was driven by expansions of the Storm and Charged Cotton products, and the introduction of ColdGear Infrared.
Footwear sales, which jumped 28 percent to $81 million from $63 million, were led by gains in both running and football athletic shoes. Though the company has held a No. 2 market share in sales of football and baseball cleats since entering that market in 2006, it’s now going after the much bigger $7 billion running shoe market.
“The real opportunity for us is to play in that bigger space of sports like running and basketball,” said Brad Dickerson, Under Armour’s chief financial officer, in an interview.
The company’s goal is to clinch the No. 3 spot in the running shoe market, after Nike and Asics, and said it already achieved that rank in many of its partner sporting goods stores. In the coming year, the company plans new versions of its Spine and Speedform shoes.
The company raised its estimates of net revenue for the year to $2.26 billion, or 23 percent growth, from its previous estimate of $2.23 billion to $2.25 billion, or growth of 22 percent to 23 percent over 2012.
“We remain long-term bulls on UA,” said John Zolidis, an analyst with The Buckingham Research Group, in a Thursday research report. “We believe the company has created an aspirational brand and is developing a product pipeline and strategy that will allow it to continue to grow at robust rates over the foreseeable future. However, we believe this outlook is more than factored into analyst estimates and the stock’s valuation at current levels.”
Under Armour’s U.S. momentum is expected to fuel global growth, Plank said.
In Europe, “we have good momentum, but we need to capitalize on it,” he said during a Thursday conference call with analysts. “That tipping point is something very close for us.”
Specialty Under Armour stores have opened recently in China, Japan and Mexico, as have new offices in Brazil and Chile.
New store openings continue in the U.S., as Under Armour rolls out additional “Brand House” stores. The first opened in February in Harbor East in downtown Baltimore.
A Brand House will open Nov. 7 at Tysons Corner Center in Virginia. The company said the new 8,300-square-foot store is designed with the largest selection of youth offerings of any store, a high growth segment for Under Armour and part of its strategy of hooking young people early on the brand.
“Our biggest challenge is appropriate distribution,” Plank told analysts during the call. “We’re really resonating with kids and looking forward to growing up and growing old with them, too.”