Under Armour Ups Guidance Again on Strong Q3…

Under Armour, Inc. posted its largest quarter in its short history in the third quarter, blowing past the $100 million mark for the first time. In fact, the company established a new benchmark above $125 million. The increase represented an acceleration of growth in the company’s core apparel business as well, which grew 42% for the period versus 31% in the second quarter. However, the third quarter saw less upside from the brand’s nascent cleated footwear business, due in large part to an almost complete liquidation of inventories.

The compression apparel business grew about 30% in the third quarter, thanks in part to the success of higher-priced derivative products that helped push average selling prices up and diversify the brand’s look on the floor. Management said the success of the new product did not cannibalize the basic goods, either.

The youth business took center stage for the period, outpacing growth in the adult business, but off its own pace for the year. Much of the gain here came from the addition of the girl’s category in the third quarter, which accounted for nearly a third of overall growth in youth. The other area that showed slower growth was women’s, which still posted very solid growth, but off the 62% pace for the YTD period.

Management said the growth in the accessories business came primarily from increased sales in football gloves. Based on POS data compiled by SportScanINFO, Under Armour picked up nearly seven points in market share in the football gloves category in the Sports Retailer sector for the YTD period.

International was said to be about 2% to 3% of revenues for the third quarter and should come in “slightly under” 5% of revenues in 2007.

The company’s licensing business, which is primarily done at college bookstores and green-grass golf shops through a partnership with Gear for Sports, is now at about 1,200 doors. The business grew about 62% to $5.2 million for the quarter.

Football cleats, which represented about 20% of revenues for Q2, should be about the same next year. Baseball cleats are expected to contribute about 5% to 6% of sales in Q4 this year and the 2007 first quarter. The compression business, which was about 75% of total apparel three years ago, is now about 53% of the apparel business, with loose-fitting product now delivering roughly 47% of sales.

Marketing expenses were down as a percent of sales, coming in at about 10% of sales in Q3 versus 11.7% for the year-ago period.

Net income growth was nothing short of phenomenal for the quarter and would have still grown 63% when excluding a $2.3 million, or five cents per diluted share, benefit to the bottom line from the impact of new state tax credits. The company said it anticipates an additional $1.0 million benefit from new state tax credits in the fourth quarter.

UARM expanded its outlet store base to eleven stores in the third quarter and plans to add five or six more stores in 2007.

Under Armour now sees total revenues for the year in the range of $410 million to $420 million, a 46% to 49% increase over 2005, and annual net income in the range of $38.5 million to $39.5 million. The company had already increased guidance at the end of Q2 when they issued a forecast of net income in the range of $34 million to $35 million on sales in the range of $400 million to $410 million.

Sales and earnings growth for 2007 are expected to exceed the stated target of 20% to 25% annual growth.