Umbro’s U.S. business has underperformed significantly in 2006 due to weakness at Foot Locker. The company said the U.S. performance “has not been in line with expectations, the shortfall resulting from reduced revenues from Foot Locker.” Overall, sales in the U.S. were down 63.1%. However, excluding Foot Locker, sales with soccer speciality stores and mail order have driven growth of 40.2%. Umbro also noted that it entered into a 15-year distribution agreement with Dick's Sporting Goods to turn around the U.S. business.

“This agreement will result in increasing revenues in 2007 and beyond,” Umbro management said in a prepared statement.

Overall, Umbro reported a pre-tax profit of £26.6 million ($51 mm), up 15.7% on the same period a year earlier. Revenues jumped 16.3% to £409.4 million ($790 mm). The increase at England’s kit manufacturer was helped by the 2006 World Cup, but the group cautioned that UK market conditions “remain challenging” although continued growth is anticipated from the international markets. The company also said that since 2007 is a non-tournament year, it expects a reduction of licensed apparel sales in the UK.

A successful 2006 World Cup drove a 22% growth in the UK market versus 2005 with significant increases in England team associated product and 3 Lions product sales. Sales of football team and club products were up 32.5%, while branded sales were up 9.6%. Sales of just England team products surged 248% during the year.

Gross margins declined to 50.4% of sales from 54.4% due to the increased proportion of lower-margin England associated product and to discounting of England kits after the quarterfinals of the World Cup. Outside the U.K., international sales grew 14% at constant rates, led by China (up 48%) and Russia (up 40%).

Full Year Results
(in $ millions) 2006 2005 Change*
Total Sales   $220.6  $180.5  +20.8%
 Royalties   $54.9  $43.5  +24.9%
Wholesale Sales   $220.6  $180.5  +20.8%
 Licensed App   $172.8  $134.7  +26.7%
 Branded App   $27.0  $20.7  +29.1%
 Footwear   $199.8  $155.4  +27.1%
 Equip./Other   $12.9  $19.0  -32.7%
Gross Margins   50.4% 54.4% -400 bps
Net Income   $36.4  $28.8  +24.9%
Inventories**   $23.4  $12.5  +64.4%
* Change in British Pounds
** at year-end