Umbro said its U.S. business has underperformed significantly in 2006 due to weakness at Foot Locker.

In reporting 2006 results. Umbro said the USA 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, Umbro said that 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 Inc. to turn around the U.S. business.

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

Overall, Umbro reported a pre-tax profit of £26.6 million ($51 MM), up 15.7 per cent on the same period a year earlier. Revenues jumped 16.3% to £409.4 million ($790 million).

The increase at England’s kit manufacturer was boosted 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 Greater China (up 48%) and Russia (up 40%).

“2006 has been a record year for Umbro and I am pleased with the progress we are making,” said Peter McGuigan, Umbro CEO. “The World Cup further reinforced the authenticity of Umbro as a global football brand. The development of technical performance ranges along with the distribution success of our lifestyle collections continues to enhance the image
of Umbro. I am particularly pleased with the growth of our international markets and despite the challenging conditions in our home market, the performance of Russia and China in particular show great promise for the future of Umbro.”

Nigel Doughty, Chairman of Umbro commented, “Umbro has grown significantly since flotation in 2004. The China joint venture and the opening of our own Asian apparel sourcing office means that Umbro is well positioned for future growth. In addition, the increasing strength of the business will allow Umbro to take advantage of exciting growth enhancing investments within the brand's priority markets.”

Umbro was debt free at the year end, however, the investment in China and the pattern of sales in 2007 are expected to result in a net debt position at the end of 2007.