Strong Forecast Signals Under Armour’s Move to No. 2 Spot?

In What's New, Industry News by Accessories Staff

underarmourBaltimore, MD—After its bullish full year earnings and sales forecast, Under Armour is being touted as the next big thing in sporting goods, possibly rising to the No. 2 spot past Adidas and behind No. 1 Nike.

In its earnings report on Friday, Under Armour posted a flat second-quarter profit of $17.7 million on $609.7 million in revenue. Its international revenues for the period more than doubled to $51.6 million, now accounting for roughly 8% of the business. North American sales, the bulk of Under Armour’s business, rose 30% in the quarter. Footwear revenues, meanwhile, climbed 34% to $109.5 million.

The performance apparel, footwear and accessories brand said net income amounted to $18 million in the three months to June 30, unchanged from the prior year period, due to planned marketing and innovation expenses.

‘Broad Based Momentum’

Net revenues jumped 34% to $610 million from $455 million a year ago. Apparel revenues grew 35%, and footwear revenues increased 34%, with its Highlight ClutchFit and SpeedForm “resonating” with consumers.

Gross margin improved slightly to 49.2% from 48.3% last year, driven by favorable year-over-year sales mix and product margins.

“The broad-based momentum that we have been experiencing recently showed no signs of stopping during the second quarter,” said Chairman/CEO Kevin Plank. “While we continued to add more dimension to our largest growth driver in apparel, we were particularly encouraged by the brand response we are seeing in both our footwear and international businesses.”

Under Armour now expects full year revenue to range from $2.98 billion to $3 billion, compared to its earlier guidance of $2.88 billion to $2.91 billion. Operating income is forecast to reach $343 million to $345 million, up from its earlier guidance of $331 million to %334 million.

UBS analysts viewed the significant rise as “bullish” considering the second quarter represents its lowest volume. Michael Binetti, Steven Strycula, and K.C. Stumbaugh said: “In our recent meetings, Under Armour commented that it prefers to spend back any upside this year to make growth plans for 2015 ‘bulletproof’. “A big revenue guidance increase in second-quarter together with Under Armour’s history of giving early guidance for the out-year on its third-quarter call puts another clear positive catalyst on the calendar for Under Armour, in our view.”

While the brand has seen big sales gains before, “what is unprecedented is the source of our growth,” Plank said during a conference call with analysts. “As we reach the midpoint … we will all look back on 2014 as a pivotal year in our diversification.”

With strong, broad-based growth, “Under Armour is positioned for the future,” wrote Sam Poser, an analyst with Sterne Agee, adding that Under Armour “is well on its way to becoming the solid #2 player” by eclipsing Adidas.

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