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Under Armour Surpasses Estimates

Zacks Equity Research

Strong performance in the Apparel category led Under Armour Inc. (UA) to post robust fourth-quarter 2012 results. The quarterly earnings of 47 cents a share came a penny ahead of the Zacks Consensus Estimate and surged 51% from the comparable year-ago quarter. 

Total net revenue was also strong at $505.9 million, up 25.5% year over year and ahead of the Zacks Consensus Estimate of $498 million.

The company witnessed strong year-over-year performances across all its segments. Consequently, Under Armour now expects 2013 net revenue to be in the range of $2.20 billion to $2.22 billion, up 20%–21% year over year.

Category Performance

The company's largest product category, Apparel, witnessed a 25.1% increase in revenue to $404.5 million, reflecting growth across men’s, women’s and youth apparel businesses, and innovative products such as Studio product and Armour Bra. Under Armour remains optimistic about a healthy market for Studio product and Armour Bra.

Footwear net revenues soared 42.7% to $44.7 million, including the sturdy performance of the UA Spine. Moreover, the company witnessed strong growth in the 2013 line of new baseball cleats.

Net revenue in the Accessories category rose 15.8% to $42.6 million during the quarter, while Licensing revenues elevated 20.7% year over year to $14 million.

Baltimore, Md.-based Under Armour announced that direct-to-consumer net revenues surged 29% during the quarter, representing 39% of the total revenue.


Gross profit rose 22.3% to $254.2 million during the quarter, while gross profit margin contracted 130 basis points to 50.3%, reflecting unfavourable sales mix and rise in air freight costs. 

Operating income increased 47.5% year over year to $81.6 million, whereas operating margin expanded 240 basis points, reflecting lower marketing and selling costs. Operating income is now projected to be in the range of $255 million – $257 million for 2013, up 22%-23% year over year.

Stores Update

Under Armour opened 5 new Factory House stores during the quarter, increasing the store count to 101. Going forward, the company intends to add 15 new All-American and 20 blue-chip shopping shops at Dick's Sporting Goods Inc. (DKS). Moreover, with strong performance across its Women's, Youth and Underwear segments, the company is witnessing growth in its floor space at its key department store distribution partners like Macy's Inc. (M), Dillard's Inc. (DDS) and Belk department stores.

Other financial Details

Under Armour ended the quarter with cash and cash equivalents of $341.8 million, total long-term debt of $62 million and shareholders’ equity of $816.9 million. The company had no borrowings under its revolving credit facility of $300 million at the end of the quarter.

Capital expenditures were approximately $23 million for the quarter under review. Management now expects 2013 capital expenditures to be in the range of $80 million – $85 million.

Currently, Under Armour holds a Zacks Rank #4 (Sell).

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