Under Armour reported earnings more than doubled to $3.5 million, or 7 cents a share, from $1.4 million, or 3 cents, a year ago. Revenues climbed 24%, driven by 34% apparel and 60% direct-to-consumer growth. The company also raised its revenue and EPS outlook for the year.
Second quarter apparel net revenues increased to $150.2 million compared with $112.0 million in the same period of the prior year, driven primarily by strong growth in both the Men's and Women's apparel businesses. Direct-to-Consumer net revenues grew 60% year-over-year during the second quarter driven by new Factory House store growth, strong retail comparable store sales, and sustained strength with the Web business. Footwear net revenues in the second quarter of 2010 were $35.8 million compared with $37.5 million in the second quarter of 2009. The company had previously indicated that Running and Training footwear revenues were expected to decline in 2010 compared with 2009.
Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, “The Under Armour Brand continues to resonate with consumers, demonstrated by consecutive quarters of 30%+ apparel growth. By addressing the athlete's needs through a combination of technology, fit and design, we have become the dominant player in Men's performance apparel and are being embraced by a growing number of female athletes each and every day. This leadership will provide the framework for our continued push into new and expanded categories, distribution, and geographies.”
For the second quarter, operating income rose 104% to $6.9 million compared with $3.4 million in the prior year's period. Gross margin for the second quarter of 2010 increased to 48.8% compared with 44.8% in the prior year's quarter primarily due to increased sales in the higher margin Direct-to-Consumer channel, improved apparel mix and sourcing, and lower markdowns. Selling, general and administrative expenses as a percentage of net revenues were 45.4% in the second quarter of 2010 compared with 42.7% in the prior year's period as a result of increased investments in product creation and supply chain as well as continued expansion of the Factory House stores. Marketing expense for the second quarter of 2010 was 13.4% of net revenues compared with 13.3% in the prior year.
For the first six months of 2010, net revenues increased 19.1% to $434.2 million compared with $364.6 million in the prior year. Net income for the first six months of 2010 increased 98% to $10.7 million compared with $5.4 million in the same period of 2009. Diluted earnings per share for the first six months of 2010 was $0.21 on weighted average common shares outstanding of 51.0 million compared with $0.11 per share on weighted average common shares outstanding of 50.5 million in the prior year.
Balance Sheet Highlights
Cash and cash equivalents were $156.1 million at June 30, 2010 compared with $79.5 million at June 30, 2009. The company had no borrowings outstanding under its $200 million revolving credit facility at June 30, 2010. Inventory at quarter-end totaled $179.2 million compared with $181.4 million at June 30, 2009. Net accounts receivable increased 13% to $96.3 million at June 30, 2010 compared with $85.4 million at June 30, 2009.
Outlook for 2010
The company had previously anticipated 2010 annual net revenues in the range of $965 million to $985 million, an increase of 13% to 15% over 2009, and 2010 diluted earnings per share for the full year of $1.05 to $1.07, an increase of 14% to 16% over 2009. Based on the second quarter results and improved visibility for the full year, the company now expects 2010 annual net revenues in the range of $990 million to $1.01 billion, an increase of 16% to 18% over 2009. The company also expects 2010 diluted earnings per share in the range of $1.11 to $1.13, an increase of 21% to 23% over 2009.
Plank concluded, “As a growth company, our success is not only defined by the results we achieve today, but how we position the Under Armour Brand for sustainable long-term growth. We remain dedicated to building out large scalable businesses and see tremendous opportunities beyond our current business drivers. We are relentless in our pursuit to better leverage the Under Armour Brand across broader categories such as footwear and deeper into international markets. The strength of our Brand, the commitment of our team, and our ability to invest give us great confidence in our future.”
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
Quarter | % of Net | Quarter | % of Net | Six | % of Net | Six | % of Net | |||||
Net revenues | $ 204,786 | 100.0% | $ 164,648 | 100.0% | $ 434,193 | 100.0% | $ 364,648 | 100.0% | ||||
Cost of goods sold | 104,860 | 51.2% | 90,919 | 55.2% | 226,636 | 52.2% | 201,695 | 55.3% | ||||
Gross profit | 99,926 | 48.8% | 73,729 | 44.8% | 207,557 | 47.8% | 162,953 | 44.7% | ||||
Selling, general and administrative expenses | 93,034 | 45.4% | 70,348 | 42.7% | 187,081 | 43.1% | 151,676 | 41.6% | ||||
Income from operations | 6,892 | 3.4% | 3,381 | 2.1% | 20,476 | 4.7% | 11,277 | 3.1% | ||||
Interest expense, net | (580) | (0.3%) | (583) | (0.4%) | (1,126) | (0.2%) | (1,443) | (0.4%) | ||||
Other expense, net | (167) | (0.1%) | (362) | (0.2%) | (852) | (0.2%) | (349) | (0.1%) | ||||
Income before income taxes | 6,145 | 3.0% | 2,436 | 1.5% | 18,498 | 4.3% | 9,485 | 2.6% | ||||
Provision for income taxes | 2,643 | 1.3% | 997 | 0.6% | 7,826 | 1.8% | 4,084 | 1.1% | ||||
Net income | $ 3,502 | |||||||||||
