Under Armour Ups Guidance After Strong Q2 Revenue Gain

Net income growth trailed net revenues growth, primarily due to a planned shift of marketing expenses into the second quarter.

Diluted earnings per share for the second quarter of 2012 were 6 cents on weighted average common shares outstanding of 106 million compared with 6 per share on weighted average common shares outstanding of 105 million in the prior year's period. Wall Street's consensus estimate had been 5 cents a share.

Second quarter apparel net revenues increased 23 percent to $253 million compared with $205 million in the same period of the prior year, driven by strength across Men's, Women's, and Youth apparel businesses. Direct-to-Consumer net revenues, which represented 29 percent of total net revenues for the second quarter, grew 35 percent year-over-year. Second quarter Footwear net revenues increased 44 percent to $67 million from $47 million in the prior year's period, primarily driven by new 2012 running styles, including the debut of UA Spine. Second quarter accessories net revenues increased 21 percent to $39 million from $32 million in the prior year's period.

Kevin Plank, chairman, CEO, and president of Under Armour, Inc., stated, “Our heightened attention to innovation across all of our product lines continues to resonate with consumers. Our broad-based success during the quarter reflects our ability to build upon platform technologies such as Charged Cotton, while introducing new ideas such as ColdBlack. In Women's, we are redefining how the female athlete looks at our brand with the strong introductions of our Studio line and Armour Bra. We are also excited about gaining momentum in the footwear space with game-changing products such as our $130 Highlight football cleat and the just-launched UA Spine running shoe.”

Gross margin for the second quarter of 2012 was 45.9 percent compared with 46.3 percent in the prior year's quarter, primarily reflecting less favorable North American apparel and accessories product margins, partially offset by less sales discounts and allowances. Selling, general and administrative expenses as a percentage of net revenues were 42.7 percent in the second quarter of 2012 compared with 42.4 percent in the prior year's period, reflecting the planned shift in marketing expenses. Marketing expenses for the second quarter of 2012 were 12.6 percent of net revenues compared with 11.7 percent in the prior year's quarter. Second quarter operating income grew 3 percent to $12 million compared with $11 million in the prior year's period.

Balance Sheet Highlights

Cash and cash equivalents increased 19 percent to $143 million at June 30, 2012 compared with $120 million at June 30, 2011. The company had no borrowings outstanding under its $300 million revolving credit facility at June 30, 2012. Inventory at June 30, 2012 increased 22 percent to $381 million compared with $311 million at June 30, 2011. Long-term debt increased to $74 million at June 30, 2012 from $37 million at June 30, 2011, primarily driven by the acquisition of the Company's corporate headquarters in July 2011.

Updated 2012 Outlook

The Company had previously anticipated 2012 net revenues in the range of $1.78 billion to $1.80 billion, representing growth of 21 percent to 22 percent over 2011, and 2012 operating income in the range of $203 million to $205 million, representing growth of 25 percent to 26 percent over 2011. Based on current visibility, the company now expects 2012 net revenues in the range of $1.80 billion to $1.82 billion, representing growth of 22 percent to 24 percent over 2011, and 2012 operating income in the range of $205 million to $207 million, representing growth of 26 percent to 27 percent over 2011. The company now expects an effective tax rate at the lower end of previously provided full year guidance of 37.5 percent to 38.0 percent, compared to an effective tax rate of 38.2 percent for 2011. Adjusted for the two-for-one stock split, the company anticipates fully diluted weighted average shares outstanding of approximately 106 million to 107 million for 2012.

Plank concluded, “As we head into the second half of the year, the opportunities for our brand have never been greater. Sustaining our momentum in Footwear and Women's will be a priority and we are elevating the messaging behind these opportunities to help drive further awareness with our consumers. This month, we took the next step to introduce the brand to the global stage with our sponsorship of Tottenham Hotspur Football Club of the Barclays Premier League. Finally, as we announced last month, we are excited to welcome two new members to our Board, Brenda Piper and Admiral Eric Olson (Ret.), and look forward to their contributions.”