Under Armour, Inc. shrugged off a very sharp increase in inventories a the end of the third quarter as a strategic planned increase, convincing Wall Street to give them some more time to prove out their model that has relied on very rapid sales growth since the company was first founded. 

The overall revenue growth trend slowed a bit in the third quarter versus the third quarter results last year, a 46.3% improvemtn this year versus 47.5% last year, but the trend resulted in much the same — increased guidance for the year.

The company increased overall revenue expectations for the year to $590 million to $600 million, an increase of 37% to 39% over 2006, and $10 million more than the previous forecast.  Income from operations is now expected to be in the range of $81.5 million to $83.0 million, an increase of 42% to 45% over 2006, versus the previous forecast that estimated operating income in the $79.0 million to $81.0 million range.  Still, analysts were a bit concerned with the slower growth expectations for the fourth quarter of this year, given the fact that inventories had doubled at the end of the third quarter.

The angst comes in part from Under Armour’s forecast, based on sales at retail in September and October, that would see fourth quarter sales in the range of $158 million to $168 million, or growth limited to a range of 17% to 24% versus the 55% growth seen in the fourth quarter last year.

For the third quarter, the men’s apparel business was up nearly 43% this year, versus 38% growth in the year-ago period, fueled no doubt by an expanding business in Europe and moves into new categories of business such as golf, outerwear and other outdoor apparel. 

Compression still continues to grow at double-digit rates, according to Under Armour chairman, president, & CEO Kevin Plank, but he also said that the men’s training category grew faster than the overall compression business, up nearly 60% year-to-date, and the golf business was up more than 140% year-to-date. 

Still, the men’s apparel business did make up a bit smaller slice of the Under Armour pie in the third quarter this year as the other genders and non-apparel categories once again grew at a more rapid rate this year.  Men’s apparel represented 60.5% of total Q3 sales this year, compared to 62.0% of overall sales in the year-ago period.  Women’s apparel, which also outpaced growth from last year by nearly two percentage points, represented 21.1% of total UA third quarter sales this year versus 20.8% in Q3 last year.  Growth in the youth business, which was still higher than men’s and women’s, did slow a bit this year as fewer retailers were ramping up a new business.  The youth business was up 51% in the third quarter versus growth of nearly 62% in the year-ago period.  Still, youth apparel made up 8.9% of the overall UA business this year, about 30 basis points higher than last year’s share.
Average selling prices for the overall apparel business were up 11% for the third quarter.

Footwear, which was hardly mentioned on the quarterly call with analysts except for talk about the performance trainer launch scheduled for late spring 2008, only posted sales growth of 7.8% for the period, accounting for 1.2% of sales versus 1.6% of sales in Q3 last year. 

The accessories business doubled this year, accounting for 4.1% of sales in Q3, compared to 3.0% of total revenues in Q3 last year.

>>> Year-end inventories are expected to be 5% to 10% higher than third quarter-end, which would put them 96% to 106% higher than year-end 2006…