Under Armour, Inc. saw shares increase nearly 12% for the week to close at $36.78 on Friday after moving past the $40 mark for the first time since January of this year. The gain on Wall Street is a reflection of increased guidance provided by the company last week after reporting very strong results for the first quarter. The improved outlook comes as the brand moves more aggressively to expand beyond its core position in compression products into broader use and acceptance of its looser garments such as t-shirts and golf shirts as well as the launch of its football cleated program, which are expected to be available for sale in early June.

Every football junkie in America (and elsewhere) probably knows by now what most in the industry already knew about Under Armour’s move into cleated product after the launch of new ads from the company’s “Click-Clack” campaign. The ads featured Ohio State linebacker AJ Hawk, who went to Green Bay with the fifth overall pick, and Vernon Davis, the Maryland tight end that went to the 49’ers with the sixth pick overall. Maryland, Auburn, and Texas Tech will be wearing the cleats in the fall. Baseball cleats, which will hit the market next spring, will be seen on a few MLB players this fall, but NFL players will have to spat the product.

UARM Founder, Chairman, and CEO Kevin Plank, also a former Terrapin player, said the entry into footwear is just one of the four key drivers to the business. He also pointed to growing the core business in men’s, continued expansion of new consumer segments like women’s, and growing the brand’s international presence, with an initial focus on Western Europe. He said they were currently selling at retail in the U.K. with partners like JJB Sports and are working to ramp up retail efforts in Germany, France, and the Benelux region.

The men’s business represented about 61.5% of the total business in the first quarter, compared to just over 70% in the first quarter last year. Women’s expanded to 24.6% of total sales from 17.4% in Q1 last year, and the youth business grew to 8.2% of total sales from 5.6% in the year-ago period on its way to the plan of 10% of total sales. Accessories sales slipped a bit to 5.6% of sales from 6.7% of sales last year. Licensing revenues rose 65.8% to $2.4 million, or 2.7% of total revenues from 2.5% of total revenues in the prior year period. The 610 basis point improvement in gross margin was due in part to the movement of more sourcing to Asia and other regions (300 bps), a shift in certain customer incentives from discounts to marketing spends in SG&A (60 bps). Also, last year’s Q1 gross margin included a 160 basis point reduction related to inventory write-down during that period.

Under Armour now expects full year revenues in the $380 million to $390 million range, with about $16 million of that $30 million to $40 million of increased guidance already accounted for in the first quarter. The balance is coming from increased demand for apparel and the football cleat program, as well as a baseball cleat program that will deliver in Q4. Second quarter revenue is expected to be in the $70 million to $75 million range.

Net income is now expected to increase between 57% and 62% to a range of $31 million to $32 million for the year. Second quarter net income is seen in the range of $250,000 to $750,000.


>>> As with other campaigns, if a consumer has to have the Click-Clack ad explained to them, they probably aren’t UARM’s target audience…

Under Armour   Other Key UARM Metrics:
First Quarter Results   · Q1
Operating margins rose to 16.2% of revenues from 8.4% in Q1 last year.
(in $ millions) 2006 2005 Change  
Revenues $87.7 $58.2 50.7%   · New
performance products introduced this spring accounted for 45% of the
year-on-year growth.  
Men’s $52.5 $39.8 31.8%  
Women’s $21.0 $9.9 112%  
Youth $7.0 $3.2 120%   · Fill-in
business accounted for “close to” 50% of sales for the first quarter.
Accessories $4.8 $3.8 25.5%  
Gross Margin 50.5% 44.4% +610 bps   · Marketing
spend was 8.6% of sales in Q1, compared to about 11% in Q1 last year.
SG&A % 34.3% 36.0% -170 bps  
Net Income $8.7  $2.5  +248%   · Total
year and Q2 marketing spend is planned at 10% to 12% of sales.
Diluted EPS 18¢ 5¢ +260%  
Inventories*  $53.5  $53.6  -0.2%   · Cleated
footwear deliveries are expected to account for 15% to 20% of second
quarter sales.
Accts Rec* $63.2 $53.1 +19.0%  
* at quarter end  
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