Under Armour, Inc. said net revenues for the third quarter ended Sept. 30, 2010 increased 22% to $328.6 million compared with net revenues of $269.5 million in the third quarter of 2009. Net income increased 33.2% to $34.9 million, or 68 cents a share, in the third quarter of 2010 compared with $26.2 million, or 52 cents, in the prior year's period.
EPS benefited approximately 5 cents from a lower than expected effective income tax rate of 37.7%, primarily resulting from federal and state tax credits and tax planning strategies.
Third quarter apparel net revenues increased 28% to $276.7 million compared with $215.4 million in the same period of the prior year, driven by strong growth across the Men's, Women's, and Youth apparel businesses. Direct-to-Consumer net revenues, which represented 18% of total net revenues for the quarter, grew 47% year-over-year during the third quarter. Footwear net revenues in the third quarter of 2010 declined to $26.5 million from $33.0 million in the third quarter of 2009. The company had previously indicated that Running and Training footwear net revenues were expected to decline in 2010 compared with 2009.
Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, “Third quarter results demonstrate our growth engines remain strong. Importantly, we see significant opportunities ahead to broaden our consumer reach, supported by continued growth in both our wholesale apparel and Direct-to-Consumer channels. We expect these businesses, along with bringing our licensed hats and bags business in-house and an expected return to growth in footwear, will continue to drive results through 2011.”
For the third quarter, operating income rose to $56.7 million compared with $47.1 million in the prior year's period. Gross margin for the third quarter of 2010 was 50.9% compared with 49.5% in the prior year's quarter primarily due to lower sales returns and other reserves, a more favorable year-over-year impact of liquidations and inventory reserves, as well as a higher percentage of revenue from our higher margin Direct-to-Consumer channel.
Selling, general and administrative expenses as a percentage of net revenues were 33.6% in the third quarter of 2010 compared with 32.0% in the third quarter of 2009 as a result of continued expansion of the Factory House stores as well as increased investments in product innovation and supply chain. Marketing expense for the third quarter of 2010 was 10.9% of net revenues compared with 10.5% in the prior year.
For the first nine months of 2010, net revenues increased 20% to $762.8 million compared with $634.2 million in the prior year. Net income for the first nine months of 2010 increased 44% to $45.5 million compared with $31.6 million in the same period of 2009. Diluted earnings per share for the first nine months of 2010 increased 44% to 89 cents compared with 62 cents per share in the prior year's period.
Balance Sheet Highlights
Cash and cash equivalents increased 43% to $133.9 million at Sept. 30, 2010 compared with $93.4 million at Sept. 30, 2009. The company had no borrowings outstanding under its $200 million revolving credit facility at Sept. 30, 2010. Inventory at quarter-end increased 28% to $196.2 million compared with $152.8 million at Sept. 30, 2009. Net accounts receivable increased 20% to $174.2 million at Sept.30, 2010 compared with $145.0 million at Sept. 30, 2009.
Outlook
The company had previously anticipated 2010 annual net revenues in the range of $990 million to $1.01 billion, an increase of 16% to 18% over 2009, and 2010 diluted earnings per share for the full year of $1.11 to $1.13, an increase of 21% to 23% over 2009. Based on the third quarter results and improved visibility for the full year, the company now expects 2010 annual net revenues in the range of $1.030 billion to $1.035 billion, an increase of 20% to 21% over 2009. The company also expects 2010 diluted earnings per share in the range of $1.23 to $1.24, an increase of 34% to 35% over 2009. The updated earnings outlook reflects a full year effective tax rate of approximately 39.2%. Based on current visibility, the company expects both 2011 annual net revenues and 2011 diluted earnings per share to grow at the higher end of its long-term growth target of 20%-25%.
Plank concluded, “We are excited about the $1 billion net revenue milestone in 2010 and remain committed to taking the next step toward becoming a multi-billion dollar, global brand. To reach our goals we must remain disciplined in investing to grow the business, not just investing to defend. Important steps include the evolution of our current ColdGear product, the introduction of our first basketball shoes this past weekend, and leading the market once again with an innovative new apparel launch in early 2011.”
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CONSOLIDATED STATEMENTS OF INCOME |
||||||||||
|
Quarter |
% of Net |
Quarter |
% of Net |
Nine |
% of Net |
Nine |
% of Net |
|||
|
Net revenues |
$ 328,568 |
100.0% |
$ 269,546 |
100.0% |
$ 762,761 |
100.0% |
$ 634,194 |
100.0% |
||
|
Cost of goods sold |
161,196 |
49.1% |
136,226 |
50.5% |
387,832 |
50.8% |
337,921 |
53.3% |
||
|
Gross profit |
167,372 |
50.9% |
133,320 |
49.5% |
374,929 |
49.2% |
296,273 |
46.7% |
||
|
Selling, general and administrative expenses |
110,683 |
33.6% |
86,257 |
32.0% |
297,764 |
39.1% |
237,933 |
37.5% |
||
|
Income from operations |
56,689 |
17.3% |
47,063 |
17.5% |
77,165 |
10.1% |
58,340 |
9.2% |
||
|
Interest expense, net |
(542) |
(0.2%) |
(466) |
(0.2%) |
(1,668) |
(0.2%) |
(1,909) |
(0.3%) |
||
|
Other income (expense), net |
(184) |
(0.1%) |
96 |
0.0% |
(1,036) |
(0.1%) |
(253) |
(0.0%) |
||
|
Income before income taxes |
55,963 |
17.0% |
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