All built up with a slew of new products, a major ad campaign
and a growing retail presence, Under Armour is flexing its
That was the message the sports apparel outfit sent April 19
when it reported first-quarter results that beat views and raised
2013 operating income and revenue guidance.
Under Armour (
) said it earned 7 cents a share, down 50% from a year earlier as
it got hit by higher marketing and other costs. But earnings came
in 4 cents ahead of forecasts by analysts polled by Thomson
Reuters, helping to lift the stock. Revenue rose 23% to $471.6
million, topping estimates for $467.79 million.
It was the 15th straight quarter Under Armour scored
double-digit sales growth.
"They're continuing to block and tackle and take share," said
Piper Jaffray analyst Sean Naughton. "They were able to continue
growing the top line at 23%, which is very admirable given they
grew revenue 23% in the first quarter of last year."
Apparel sales popped 22% to $346 million, driven primarily by
the launch of a new base-layer product and strong sales of fleece
items. Accessory sales increased by the same amount to $36
million. Footwear sales rose by 27% to $81 million as it
benefited from new running shoe styles led by its UA Spine Venom
Naughton says a 42% increase in marketing expenses from a year
earlier drove the earnings down, even with the nice bump in
Under Armour also raised 2013 revenue guidance to a range of
$2.21 billion to $2.23 billion from its prior outlook of $2.20
billion to $2.22 billion. It now expects 2013 operating income in
the range of $256 million to $258 million, up from its prior
estimate of $255 million to $257 million.
During the quarter, Under Armour got a nice lift from new
products such as the Under Armour Alter Ego line of T-shirts
featuring iconic superheroes such as Batman, Superman and
Spider-Man. The line was the most successful product launch ever
on its e-commerce site, said CEO Kevin Plank on the first-quarter
conference call. It started shipping the line to its wholesale
accounts late in the quarter.
To pitch its growing product lineup, it launched globally
online its biggest worldwide marketing campaign to date.
Featuring its "I Will" trademark, the campaign focuses on the
passion and determination that drives all athletes and Under
Armour's commitment to engineering innovative products that
provide real performance advantages.
The campaign's principal creative spot features athletes such
as Canelo Alvarez, boxing's welterweight World Champion. The
commercial debuted on TV in the U.S. Feb. 16 on the TNT network
during the NBA All-Star Weekend.
At the campaign launch event, Under Armour also showcased a
new product, the Armour39 digital performance monitoring system.
Launched in March, the product reflects an individual's overall
effort during a workout session. It also tracks heart rate,
calories burned and intensity.
Naughton says the Armour39 will be among the company's key
Under Armour is also gaining traction in footwear, says John
Horan, publisher of Sporting Goods Intelligence, a weekly
"Their footwear business is starting to get some real staying
power," he said. "Their cleated business has definitely got a
following and its Spine running business has given them some
traction in running footwear."
On the conference call, Plank says Under Armour has gained
market share in performance running as a result of its Spine
In addition to upping its game on the product front, Under
Armour is also revving up its brand power with an Olympic
sponsorship. In February, it announced it will outfit USA
Gymnastic athletes, coaches and staff through the 2020 Games.
The eight-year partnership marks Under Armour's first
sponsorship of a national governing body for a summer Olympic
sport. Under the pact, Under Armour will be the official
performance apparel and footwear outfitter for USA Gymnastics
during training and conditioning as well as national and
international competition. Under Armour said it will collaborate
with GK Elite Sportswear to create U.S. National Team competition
apparel for men's and women's gymnastics, trampoline and
Naughton says the Olympic sponsorship should be good for
building the brand on a global stage as Under Armour looks to
grow internationally. Right now, Under Armour gets only 6% to 7%
of total sales outside of North America.
"International growth will likely show material acceleration
beginning in 2015," wrote Sterne Agee analyst Sam Poser in a
recent report. "We believe that management is licking its chops
as it positions the brand in Brazil for the 2016 Olympics."
He says Under Armour has a distribution network set up in
Brazil. And, he notes, Charlie Maurath, who became president of
Under Armour International last September, has had more than
eight years of recent experience heading up Latin America
forAdidas AG (
Horan says the new marketing campaign carries much more of a
global message than past efforts, and Under Armour should be able
to build on that message as it looks to expand overseas.
Expanded distribution is also helping Under Armour gain some
mileage. Within its youth category, which includes the Alter Ego
line and its women's business, growth will come from expanding
retail distribution at department stores such asMacy's (
), Dillard's (
) andNordstrom (
), says Naughton. He says Under Armour is growing its presence at
these retailers in more stores. The assortment is more tailored
to the consumer, who shops at department stores with the mix more
weighted toward fashion athletic gear than sporting goods.
Analysts polled by Thomson Reuters expect full-year earnings
to rise 21% to $1.46 a share. They expect a 26% gain in 2014.
"We are confident, based on our retail channel checks and
Under Armour commentary, growth in all categories is
sustainable," writes Poser. "Continued product improvement in
youth and women's apparel, steady growth in footwear led by
running, and an accelerating international business led by Latin
America, positions the brand well for the future."