Under Armour, Inc. reported revenues increased 23 percent in the first quarter of 2013. Apparel revenues jumped 22 while footwear advanced 27 percent. Earnings were down largely due to the timing of marketing investments but came in ahead of Wall Street’s targets.
Sales reached $472 million compared with net revenues of $384 million in the prior year’s period. Net income decreased 47 percent in the first quarter of 2013 to $8 million compared with $15 million in the prior year’s period. Diluted earnings per share for the first quarter of 2013 were 7 cents compared with 14 cents per share in the prior year’s period. Wall Street’s consensus estimate was 3 cents a share.
First quarter apparel net revenues increased 22 percent to $346 million compared with $283 million in the same period of the prior year, driven primarily by the introduction of new Baselayer product and strong sales of Fleece. First quarter footwear net revenues increased 27 percent to $81 million from $64 million in the prior year’s period, primarily driven by new running styles led by UA Spine Venom. First quarter accessories net revenues increased 22 percent to $36 million from $30 million in the prior year’s period.
Direct-to-Consumer net revenues, which represented 26 percent of total net revenues for the first quarter, grew 31 percent year-over-year.
Kevin Plank, chairman and CEO of Under Armour, stated, “In the first quarter, we drove growth in excess of 20 percent for the 12th consecutive quarter in total revenues and the 14th consecutive quarter in apparel revenues. This growth is the direct result of our enhanced design and innovation, including new and improved HeatGear Sonic Baselayer and the attention-grabbing UA Alter Ego line, featuring iconic superheroes such as Batman and Superman. Our Youth product is stronger than ever and we continue to see traction with our expanded Women’s lines in Studio and ArmourBra. Momentum is also evident in Footwear with solid sell through of our latest product in the running platform, Spine Venom.”
Gross margin for the first quarter of 2013 was 45.9 percent compared with 45.6 percent in the prior year’s quarter, primarily reflecting favorable year-over-year North American apparel product costs. Selling, general and administrative expenses as a percentage of net revenues were 43.1 percent in the first quarter of 2013 compared with 39.2 percent in the prior year’s period, primarily reflecting the timing of marketing expenses and incentive compensation expenses. First quarter operating income declined 45 percent to $13 million compared with $24 million in the prior year’s period.
Balance Sheet Highlights
Cash and cash equivalents increased 139 percent to $256 million at March 31, 2013 compared with $107 million at March 31, 2012. The Company had no borrowings outstanding under its $300 million revolving credit facility at March 31, 2013. Inventory at March 31, 2013 remained unchanged year-over-year at $324 million. Long-term debt decreased to $60 million at March 31, 2013 from $76 million at March 31, 2012.
Updated 2013 Outlook
The Company had previously anticipated 2013 net revenues in the range of $2.20 billion to $2.22 billion, representing growth of 20 percent to 21 percent over 2012, and 2013 operating income in the range of $255 million to $257 million, representing growth of 22 percent to 23 percent over 2012. Based on current visibility, the Company now expects 2013 net revenues in the range of $2.21 billion to $2.23 billion, representing growth of 21 percent to 22 percent over 2012, and 2013 operating income in the range of $256 million to $258 million, representing growth of 23 percent to 24 percent over 2012. Despite deleveraging in the first quarter, the Company continues to expect a relatively unchanged marketing expense rate from the 11.2 percent rate in 2012. The Company continues to expect an effective tax rate of 39.0 percent to 39.5 percent for the full year, compared to an effective tax rate of 36.7 percent for 2012, and fully diluted weighted average shares outstanding of approximately 108 million to 109 million for 2013.
Plank concluded, “Our strong start to 2013 was underscored by the successful debut of our first of three Brand Holidays planned for this year, which included our largest ever global marketing campaign, I WILL. As part of this Brand Holiday, we opened the first UA Brand House retail store in our hometown of Baltimore, launched the first-of-its kind performance monitoring system for athletes, Armour39 and expanded our footwear running platform led by UA Spine Venom. Combined with a heightened focus on newness and innovation throughout our 2013 product portfolio, these efforts magnify our ability to tell more impactful stories to a global audience. We are excited to share more of our vision for the future of the Brand at our upcoming Investor Day on June 5th.”
