Under Armour, Inc.
(
UA
), one of the leading developers, marketers and distributors of
branded sports apparel, footwear and accessories, recently posted
better-than-expected first-quarter 2012 results. The company outdid
expectations on the back of new and innovative products introduced
to enhance market share.
The quarterly earnings of 28 cents a share beat the Zacks
Consensus Estimate of 24 cents, and jumped from 23 cents earned in
the prior-year quarter. Under Armour's net revenue came in at
$384.4 million, up 22.9% from the year-ago quarter, and came ahead
of the Zacks Consensus Estimate of $379 million.
Let's Dig Deep
The double-digit jump in the top-line was driven by a 22.9%
increase in apparel net revenue to $283.3 million, reflecting
growth across men's, women's and youth apparel businesses, and
innovative products such as ColdBlack and Armour Bra.
Footwear net revenue soared 23.8% to $63.7 million, attributable
to new running footwear introduced in 2012. Under Armour remains
optimistic about a healthy market for footwear products.
Accessories net revenue rose to $29.6 million from $23.5 million
in the year-ago quarter. The company has now completely passed the
transition phase from the licensed hats and bags business to
in-house. Licensing revenue increased 7.2% to $7.8 million.
Baltimore, Maryland-based Under Armour said that
direct-to-consumer net revenue surged 49% during the quarter, and
now represents 25% of total revenue. Under Armour opened four new
Factory House stores during the quarter under review, increasing
the store count to 84.
Despite a 24.8% jump in cost of goods sold, gross profit rose
20.8% to $175.2 million. However, gross profit margin contracted 80
basis points to 45.6%, reflecting lower margins from North American
apparel and accessories product business. Operating income grew
15.4% to $24.4 million, whereas operating margin shriveled 50 basis
points to 6.3%.
Other Details
Under Armour ended the quarter with cash and cash equivalents of
$107.1 million, total long-term debt of $75.8 million and
shareholders' equity of $674.1 million. The increase of $62.1
million 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 $8.8 million for the
quarter under review. Management now anticipates fiscal 2012
capital expenditures between $60 million and $65 million.
Inventory for the quarter climbed 30.5% year-over-year to $324.4
million. Going into 2012, the company will have to keep a close
watch on its inventory position. The company is focusing on Stock
Keeping Unit (SKU) rationalization program, which will help in
eliminating SKUs based on lower sales volume or weak margins. Under
Armour plans to lower its total assortment by 20% in fiscal
2012.
Strolling Through Guidance
Under Armour now expects fiscal 2012 revenue between $1.78
billion and $1.80 billion, reflecting year-over-year growth of 21%
to 22%. Earlier, management had forecasted revenue growth to be at
the lower end of the long-term guidance range of 20% to 25%.
The company projected operating income in the range of $203
million to $205 million for fiscal 2012, indicating growth of 25%
to 26% from the prior year. Earlier, management had guided
operating income growth at the higher end of the long-term guidance
range of 20% to 25%.
Closing Commentary
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 #1 Rank that translates into a short-term Strong
Buy rating.
COLUMBIA SPORTS (
COLM
): Free Stock Analysis Report
NIKE INC-B (
NKE
): Free Stock Analysis Report
UNDER ARMOUR-A (
UA
): Free Stock Analysis Report
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