Under Armour Inc . ( UA ), one
of the leading developers, marketers and distributors of branded
sports apparel, footwear and accessories, recently posted
better-than-expected second-quarter 2012 results. The quarterly
earnings of 6 cents a share beat the Zacks Consensus Estimate by a
penny. However, earnings remained flat when compared with the
Net revenue came in at $369.5 million, up 26.8% from the
year-ago quarter, and outpaced the Zacks Consensus Estimate of $359
The company outdid expectations on the back of new and
innovative products introduced to boost market share while
consequently raising its fiscal 2012 guidance.
The double-digit jump in the top-line was driven by a 23.5%
increase in apparel net revenue to $252.8 million, reflecting
growth across men's, women's and youth apparel businesses, and
innovative products such as Studio product and Armour Bra.
Footwear net revenue soared 43.8% to $67.4 million, due to the
new running footwear introduced in 2012. Under Armour remains
optimistic about a healthy market for footwear products.
Accessories net revenue rose 21.1% to $39.2 million during the
quarter, reflecting healthy performance of bags business. The
company has completely passed the transition phase from the
licensed hats and bags business to in-house. Licensing revenue
increased 37.1% to $10 million.
Baltimore, Maryland-based Under Armour announced that
direct-to-consumer net revenue surged 35% during the quarter,
representing 29% of total revenue. Under Armour opened eight new
Factory House stores during the quarter under review, increasing
the store count to 92.
Despite a 27.8% jump in cost of goods sold, gross profit rose
25.7% to $169.5 million. However, gross profit margin contracted 40
basis points to 45.9%, reflecting lower margins from North American
apparel and accessories product business. Operating income grew
3.2% to $11.7 million, whereas operating margin shriveled 70 basis
points to 3.2%.
Under Armour ended the quarter with cash and cash equivalents of
$142.9 million, total long-term debt of $73.9 million and
shareholders' equity of $689.1 million. The increase in the
long-term debt from the prior-year quarter reflects the acquisition
of corporate headquarters in July 2011. The company had no
borrowings under its revolving credit facility of $300 million at
the end of the quarter.
Capital expenditures were approximately $15 million for the
quarter under review. Management now expects fiscal 2012 capital
expenditures between $60 million and $65 million.
Strolling Through Guidance
Under Armour expects fiscal 2012 revenue between $1.8 billion
and $1.82 billion, reflecting year-over-year growth of 22% to 24%.
Earlier, management had forecasted revenue growth between $1.78
billion and $1.80 billion, indicating a year-over-year growth of
21% to 22%.
Gross margin is expected to remain flat to marginally down
compared with the prior year. Operating income is now projected in
the range of $205 million to $207 million for fiscal 2012,
indicating a growth of 26% to 27% from the prior year. Earlier,
management expected operating income in the range of $203 million
to $205 million.
Under Armour maintains strict control over its brand image, with
an in-house marketing and promotions department, engaged in
designing and advertising while cautiously controlling the
distribution of its products.
The company offers substantial growth opportunities in the long
term through geographic, product/category and direct-to-consumer
expansion. Based on Under Armour's well established brand name, we
expect the company to continue to benefit from longer-term shifting
trends toward performance-based products within the industry.
Currently, Under Armour, which competes with Nike
Inc. ( NKE ) and Columbia Sportswear
Company ( COLM ), holds a Zacks #3 Rank that translates
into a short-term Hold rating.
COLUMBIA SPORTS (COLM): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
UNDER ARMOUR-A (UA): Free Stock Analysis Report
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