22 Oct Under Armour’s Q3 Earnings Rise 13 Percent on 28 Percent Sales Gain
Under Armour Inc. again lifted its outlook for the year after reporting strong third-quarter results. Net revenues increased 28 percent in the third quarter of 2015 to $1.20 billion compared with net revenues of $938 million in the prior year’s period. On a currency neutral basis, net revenues increased 31 percent compared with the prior year’s period.
Net income increased 13 percent to $100 million compared with $89 million in the prior year’s period and diluted earnings per share for the third quarter of 2015 were 45 cents compared with 41 cents per share in the prior year’s period, inclusive of the impacts of the Endomondo and MyFitnessPal acquisitions. Analysts estimated 44 cents, on average.
Third quarter apparel net revenues increased 23 percent to $866 million compared with $705 million in the same period of the prior year, driven primarily by enhanced product offerings in baselayer and the expanded Storm innovation platform. Third quarter footwear net revenues increased 61 percent to $196 million from $122 million in the prior year’s period, primarily reflecting continued product expansion across the running, basketball, and training categories. Third quarter accessories net revenues increased 22 percent to $104 million from $85 million in the prior year’s period, driven primarily by new introductions across the bags category. Direct-to-Consumer net revenues, which represented 26 percent of total net revenues for the third quarter, grew 28 percent year-over-year. International net revenues, which represented 11 percent of total net revenues for the third quarter, grew 52 percent year-over-year.
Kevin Plank, chairman and CEO of Under Armour, Inc., stated, “Our scoreboard in the third quarter not only marked our 22nd straight quarter of at least 20 percent net revenue growth, but also our first $1 billion quarter. Our ongoing success in 2015 has been driven by innovative, head-to-toe product, combined with game-changing performances by our athletes. Leveraging these great successes throughout 2015, our current Rule Yourself global marketing campaign highlights the training and dedication that drives our athletes to be their best on the biggest stages. The campaign features Tom Brady, Misty Copeland, Stephen Curry, and recently named PGA Tour Player of the Year Jordan Spieth. When combined with over 150 million unique registered users across our Connected Fitness community, logging more than 6.5 billion food items and 1.5 billion workouts year-to-date, our brand is resonating with more athletes than ever before and we are investing to not only build deeper relationships with these athletes today, but fulfill our longer term vision to change the way athletes live.”
Gross margin for the third quarter of 2015 was 48.8 percent compared with 49.6 percent in the prior year’s period, primarily reflecting the impacts of foreign exchange rates and sales mix, partially offset by favorable product margins. Selling, general and administrative expenses as a percentage of net revenues were 34.6 percent in the third quarter of 2015 compared with 34.0 percent in the prior year’s period, primarily reflecting 2015 openings of global Brand House stores and investments to support the Connected Fitness business. Third quarter operating income increased 17 percent to $171 million compared with $146 million in the prior year’s period.
Balance Sheet Highlights
Cash and cash equivalents decreased 36 percent to $159 million at September 30, 2015 compared with $249 million at September 30, 2014. Inventory at September 30, 2015 increased 36 percent to $867 million compared with $637 million at September 30, 2014. Total debt increased to $905 million at September 30, 2015 compared with $192 million at September 30, 2014, primarily reflecting borrowing to fund the two Connected Fitness acquisitions.
Updated 2015 Outlook
The company had previously anticipated 2015 net revenues of approximately $3.84 billion, representing growth of 25 percent over 2014, and 2015 operating income in the range of $405 million to $408 million, representing growth of 14 percent to 15 percent over 2014. Based on current visibility, the company expects 2015 net revenues of approximately $3.91 billion, representing growth of 27 percent over 2014 and 2015 operating income of approximately $408 million, representing growth of 15 percent over 2014. The 2015 guidance continues to reflect the net dilutive impact from the Connected Fitness acquisitions, as well as the impact of the strong dollar negatively affecting our operating margin within our international businesses.
Plank concluded, “We are experiencing powerful brand momentum in 2015 and we continue to invest to capitalize on our success in the near-term while establishing the foundation for sustainable growth in the future. We are confident that the building blocks to reach our Investor Day target of $7.5 billion in net revenues by 2018 are firmly in place. As we think bigger about the opportunity of our brand, an ongoing focus on investing in key areas like footwear, international, Connected Fitness and manufacturing capability will position us for the long runway of growth beyond just the next three years. Still, with all the success we have seen to date, we firmly believe that we are just getting started.”
