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Under Armour Earnings Beat, Guides High - Analyst Blog

Posted
10/25/2013 12:08:00 PM
By: Zacks.com
Referenced Stocks:BWS;CRI;NKE;UA

Under Armour Inc . ( UA ) posted third-quarter 2013 earnings of 68 cents a share that beat the Zacks Consensus Estimate by a couple of cents and surged 25.9% from 54 cents earned in the year-ago quarter.

Aided by strong performance of the Apparel and Footwear categories, total revenue came in at $723.1 million, up 25.7% year over year and ahead of the Zacks Consensus Estimate of $709 million.

Category Performance

Under Armour's largest product category, Apparel, once again witnessed strong sales. Apparel sales jumped 26.1% to $560.9 million, reflecting strength across Storm and Charged Cotton platforms, coupled with ColdGear Infrared technology, which has been recently introduced.

Footwear net revenue soared 28.3% to $81 million during the quarter. The company is witnessing strong demand of its Highlight cleats and UA Spine products.

Net revenue in the Accessories category rose 18.4% to $64.4 million during the quarter led by headwear and bags, while Licensing revenue elevated 29.4% year over year to $16.9 million.

Under Armour announced a 34% increase in direct-to-consumer net revenue during the quarter, representing 25% of the total revenue.

Margin Performance

Gross profit rose 24.9% to $350.1 million, however, gross profit margin contracted 30 basis points to 48.4% due to a rise in import duties. Operating income jumped 32.8% to $120.8 million, whereas operating margin expanded 90 basis points to 16.7%.

Stores Update

This Zacks Rank #3 (Hold) stock opened 6 new Factory House stores during the quarter, taking the store count to 112. The company now intends to add 4 more Factory House stores in the remainder year, thereby bringing the total to 116.        

Other Financial Details

Under Armour ended the quarter with cash and cash equivalents of $186.4 million, long-term debt dropped to $54 million from $72 million in the prior-year period, while shareholders' equity was $966.5 million.

Capital expenditures came in at approximately $23 million for the reported quarter. Management now expects 2013 capital expenditures to be $95 million, up from its earlier projected range of $85 million to $90 million.

Guidance

The company witnessed strong year-over-year performances across all its segments. Consequently, Under Armour raised its guidance for 2013. The company now expects net revenue of $2.26 billion, up 23% year over year. Earlier, it forecasted 2013 revenue in the range of $2.23 billion to $2.25 billion, representing growth of 22% to 23%.

Going forward, Under Armour forecasts a 50 basis points decline in gross margin during the fourth quarter. However, the company now projects operating income for 2013 to be $260 million, up 25% year over year. Earlier, the company projected operating income in the range of $258 million to $260 million, reflecting growth of 24% to 25% year over year.

However for 2014, management provided a cautious outlook with both net revenue and operating income to come in at the lower end of long-term growth targets of 20% to 25%.

Other Stocks to Consider

Until any further upgrade in Under Armour's Zacks Rank, other stocks in the Apparel, Footwear & Accessories industry worth considering include Carter's, Inc. ( CRI ) and Brown Shoe Co. Inc. ( BWS ), both carrying a Zacks Rank #1 (Strong Buy) and Nike, Inc. ( NKE ) sporting a Zacks Rank #2 (Buy).



BROWN SHOE CO (BWS): Free Stock Analysis Report

CARTERS INC (CRI): Free Stock Analysis Report

NIKE INC-B (NKE): Free Stock Analysis Report

UNDER ARMOUR-A (UA): Free Stock Analysis Report

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