Under Armour Revenues Grow 25 Percent in Fourth Quarter

Net income increased 54 percent in the fourth quarter of 2012 to $50 million compared with $33 million in the prior year’s period. Diluted earnings per share for the fourth quarter of 2012 were 47 cents on weighted average common shares outstanding of 107 million compared with 31 cents per share on weighted average common shares outstanding of 105 million in the prior year’s period.

 

Fourth quarter apparel net revenues increased 25 percent to $405 million compared with $323 million in the same period of the prior year, driven primarily by Fleece, which included a broader expansion of the Storm platform across the category.

 

Fourth quarter footwear net revenues increased 43 percent to $45 million from $31 million in the prior year’s period, primarily driven by new 2012 running styles, including UA Spine, and strong sell-in of new 2013 baseball cleats. Fourth quarter accessories net revenues increased 16 percent to $43 million from $37 million in the prior year’s period. Direct-to-Consumer net revenues, which represented 39 percent of total net revenues for the fourth quarter, grew 29 percent year-over-year.

“We closed 2012 strongly, delivering net revenue growth of at least 20 percent for the eleventh consecutive quarter in Q4 by building upon key apparel technology platforms like Storm Fleece and Charged Cotton, said Kevin Plank, chairman and CEO of Under Armour, Inc. Our ability to bring practical innovation to our consumer across a broad range of product drove our 25 percent net revenue growth in 2012 and positions us well for 2013 and beyond. With these strong results in hand, we are well on our way toward delivering on the goal established at our June 2011 Investor Day to more than double our net revenues from 2010 to 2013.”

Gross margin for the fourth quarter of 2012 was 50.3 percent compared with 51.6 percent in the prior year’s quarter, primarily reflecting less favorable sales mix and higher air freight costs. Selling, general and administrative expenses as a percentage of net revenues were 34.2 percent in the fourth quarter of 2012 compared with 37.9 percent in the prior year’s period, largely reflecting leverage of corporate services and marketing expenses.

 

Marketing expenses for the fourth quarter of 2012 were 9.7 percent of net revenues compared with 10.9 percent in the prior year’s quarter. Fourth quarter operating income grew 48 percent to $82 million compared with $55 million in the prior year’s period.

Review of full year operating results
For the full year 2012, net revenues increased 25 percent to $1.84 billion compared with $1.47 billion in the prior year and compared with the company’s prior outlook of $1.82 billion. Diluted earnings per share for the full year increased 31 percent to $1.21 per share on weighted average common shares outstanding of 106 million compared with $0.92 per share on weighted average common shares outstanding of 105 million in the prior year.

Apparel net revenues increased 23 percent to $1.39 billion compared with $1.12 billion in the prior year, led by the Training category which included the expansions of both the Charged Cotton and Storm platforms. Footwear net revenues increased 32 percent to $239 million during 2012 compared to $182 million in 2011, reflecting the debut of new running styles, including UA Spine, and strength across our cleated businesses. Accessories net revenues increased 25 percent to $166 million during 2012 compared to $132 million in 2011, primarily driven by headwear and bags. Direct-to-Consumer net revenues, which represented 29 percent of total net revenues for the year compared to 27 percent in 2011, grew 34 percent over the prior year.

Gross margin for 2012 was 47.9 percent compared with 48.4 percent in 2011, largely reflecting less favorable sales mix and higher air freight costs. Selling, general and administrative expenses as a percentage of net revenues were 36.5 percent for 2012 compared with 37.3 percent for 2011, reflecting leverage of corporate services and marketing expenses. Marketing expense for 2012 was 11.2 percent of net revenues compared with 11.4 percent in the prior year. Operating income grew 28 percent to $209 million in 2012 compared with $163 million in the prior year and compared with the company’s prior outlook of $207 million.

Cash and cash equivalents increased 95 percent to $342 million at Dec. 31, 2012 compared with $175 million at Dec. 31, 2011. The Company had no borrowings outstanding under its $300 million revolving credit facility at Dec. 31, 2012. Inventory at Dec. 31, 2012 decreased 2 percent to $319 million compared with $324 million at Dec. 31, 2011. Long-term debt decreased to $62 million at Dec. 31, 2012 from $78 million at Dec. 31, 2011.

Updated 2013 outlook
Based on current visibility, the company expects 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. The company expects 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. The company anticipates fully diluted weighted average shares outstanding of approximately 108 million to 109 million for 2013.

Mr. Plank concluded, “In the year ahead, we will drive growth by re-invigorating core categories like Baselayer, continuing to expand our consumer base in Women’s and Youth, and introducing the next wave of Under Armour innovation through product such as Armour39 that will debut in the next month. We will open the next generation of Under Armour specialty retail in mid-February in our home city of Baltimore, while we are prioritizing our growth strategies in key markets in Europe, Asia, and Latin America. We will also continue to invest in the right talent, infrastructure, and processes to ensure that we deliver balanced financial results well into the future.”
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