Under Armour, Inc. reported revenues increased 35 percent in the fourth quarter to $683 million compared with net revenues of $506 million in the prior year's period. Net income increased 28 percent in the fourth quarter of 2013 to $64 million, or 59 cents a share, compared with $50 million, 47 cents, in the prior year's period. Results topped Wall Street's consensus estimate of 53 cents a share.
Fourth quarter apparel net revenues increased 35 percent to $546 million compared with $405 million in the same period of the prior year, primarily driven by expanded Fleece offerings and new ColdGear Infrared products. Fourth quarter footwear net revenues increased 24 percent to $55 million from $45 million in the prior year's period, led by gains in running. Fourth quarter accessories net revenues increased 52 percent to $65 million from $43 million in the prior year's period, primarily driven by headwear and gloves. Direct-to-Consumer net revenues, which represented 39 percent of total net revenues for the fourth quarter, grew 36 percent year-over-year.
Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, “By any measure, 2013 was a banner year for the UA Brand. We surpassed $2 billion in net revenues for the year, which culminated with our 15th straight quarter of at least 20 percent total growth. In addition, we completed our first acquisition, MapMyFitness, opened our first two UA Brand House retail stores, and continued to make key investments in our Women's, Footwear and International businesses to drive long-term global growth. While we are proud of what we have accomplished to date, we firmly believe we are just getting started and that our performance in 2013 is indicative of the opportunity that lies ahead for Under Armour.”
Gross margin for the fourth quarter of 2013 was 51.3 percent compared with 50.3 percent in the prior year's quarter, primarily driven by the strength of the Brand contributing to a favorable sales mix. Selling, general and administrative expenses as a percentage of net revenues were 36.9 percent in the fourth quarter of 2013 compared with 34.2 percent in the prior year's period, primarily reflecting higher incentive compensation costs. Fourth quarter operating income increased to $98 million compared with $82 million in the prior year's period.
Review of Full Year Operating Results
For the full year 2013, net revenues increased 27 percent to $2.33 billion compared with $1.83 billion in the prior year and compared with the Company's prior outlook of $2.26 billion. Diluted earnings per share for 2013 increased 24 percent to $1.50 compared with $1.21 per share in the prior year.
Apparel net revenues increased 27 percent to $1.76 billion compared with $1.39 billion in the prior year, led by elevated newness across product categories like HeatGear and Fleece as well as innovation platforms including Storm, ColdGear Infrared and Charged Cotton. Footwear net revenues increased 25 percent to $299 million during 2013 compared to $239 million in 2012, reflecting expanded offerings in both the running and cleated businesses. Accessories net revenues increased 30 percent to $216 million during 2013 compared to $166 million in 2012, primarily driven by headwear and gloves. Direct-to-Consumer net revenues, which represented 30 percent of total net revenues for the year compared to 29 percent in 2012, grew 33 percent over the prior year.
Gross margin for 2013 was 48.7 percent compared with 47.9 percent in 2012, primarily driven by favorable sales mix and lower year-over-year North American apparel and accessories product costs. Selling, general and administrative expenses as a percentage of net revenues were 37.3 percent for 2013 compared with 36.5 percent for 2012, primarily reflecting higher incentive compensation costs, partially offset by the leveraging of marketing expenses. Operating income grew 27 percent to $265 million in 2013 compared with $209 million in the prior year and compared with the Company's prior outlook of $260 million.
Balance Sheet Highlights
Cash and cash equivalents increased 2 percent to $347 million at December 31, 2013 compared with $342 million at December 31, 2012. Inventory at December 31, 2013 increased 47 percent to $469 million compared with $319 million at December 31, 2012. The Company had $100 million in debt outstanding under its $300 million revolving credit facility at December 31, 2013. The $150 million purchase of MapMyFitness in December was funded using $50 million in cash and $100 million under the revolving credit facility. Long-term debt, including current maturities, decreased to $53 million at December 31, 2013 from $62 million at December 31, 2012.
Updated 2014 Outlook
Based on current visibility, the Company expects 2014 net revenues in the range of $2.84 billion to $2.87 billion, representing growth of 22 percent to 23 percent over 2013, and 2014 operating income in the range of $326 million to $329 million, representing growth of 23 percent to 24 percent over 2013. The Company expects an effective tax rate of approximately 39.0 percent for the full year, compared to an effective tax rate of 37.8 percent for 2013. The Company anticipates fully diluted weighted average shares outstanding of approximately 109 million to 110 million for 2014.
Plank concluded, “We have tremendous momentum across our business and we will leverage this strength to fuel our global growth ambitions in 2014. To start, we have recently formed partnerships with three sports programs with deep, proud heritages: the University of Notre Dame, the U.S. Naval Academy, and the Colo Colo fútbol team in Chile. In addition, today from Grand Central Station in New York City we are providing the first glimpse of our latest Global Brand Holiday, 'This Is What Fast Feels Like,' featuring our award-winning SpeedForm Apollo running shoe and our latest apparel technology, ArmourVent. Our commitment to invest in these and other key initiatives positions the Brand to better reach all athletes and provide solutions to their 24/7 needs.”
