Under Armour, Inc. reported earnings slid 17 percent in the second quarter due to foreign exchange losses and higher expenses but exceeded Wall Street's consensus estimate by two cents a share. Revenues grew 29 percent,
led by gains of 40 percent in footwear and 39 percent in accessories. Apparel was ahead 23 percent. The company again raised its revenue outlook for the year
 
Highlights

  • Second Quarter Net Revenues Increased 29 percent to $784 Million
  • Raises 2015 Net Revenues Outlook to Approximately $3.84 Billion (+25 percent)
  • Updates 2015 Operating Income Outlook to a Range of $405 Million to $408 Million (+14 percent to +15 percent), Inclusive of the Impact of the Connected Fitness Acquisitions

Under Armour reported net revenues increased 29 percent in the second quarter to $784 million, compared with $610 million in the prior year's period. On a currency neutral basis, net revenues increased 31 percent. Net income decreased 17 percent in the second quarter of 2015 to $15 million, or 7 cents a share, compared with $18 million, or 8 cents, inclusive of the impacts of the Endomondo and MyFitnessPal acquisitions.

Second quarter apparel net revenues increased 23 percent to $515 million compared with $420 million in the same period of the prior year, driven primarily by enhanced product offerings in baselayer and training. Second quarter footwear net revenues increased 40 percent to $154 million from $110 million in the prior year's period, primarily reflecting continued product expansion across the running category and ongoing excitement around Stephen Curry signature product. Second quarter accessories net revenues increased 39 percent to $83 million from $60 million in the prior year's period, driven primarily by new introductions across the bags category.

Direct-to-Consumer net revenues, which represented 32 percent of total net revenues for the second quarter, grew 33 percent year-over-year. International net revenues, which represented 11 percent of total net revenues for the second quarter, grew 93 percent year-over-year.

Kevin Plank, chairman and CEO, Under Armour, Inc., said, “More than ever before, this year has highlighted that the right investments are key to not only driving near-term results, but building the foundation for the unlimited potential of the Under Armour Brand. In the second quarter of 2015, we witnessed historic performances and accolades from our incredible portfolio of athletes including the NBA's MVP and World Champion Stephen Curry, PGA Tour pro Jordan Spieth, who won this year's Masters and U.S. Open, and the American Ballet Theatre's first-ever African American female principal dancer Misty Copeland.”

Plank continued, saying that “Leveraging these unprecedented successes for our Brand remain critical as we continue to align our strategy to attack key growth categories and drive deeper connections with the athlete. Some of these powerful connections are already evident across our distribution, where we are investing in expanded relationships with our key sporting goods and mall partners, as well as supporting our own direct-to-consumer capabilities including new Brand House openings across both the U.S. and our International markets. It also means continuing to build one of our key foundations for future growth with Connected Fitness. With our Connected Fitness community now totaling more than 140 million unique registered users and adding on average more than 100,000 new athletes each day, we are pleased with our progress and believe we are still in the early stages of uncovering the potential of what the world's largest digital health and fitness community can do to build consumer engagement and drive healthier lifestyles.”

Gross margin for the second quarter of 2015 was 48.4 percent, compared with 49.2 percent in the prior year's period, primarily reflecting the impacts of foreign exchange rates and planned air freight expenses. Selling, general and administrative expenses as a percentage of net revenues were 44.3 percent in the second quarter of 2015 compared with 43.5 percent in the prior year's period, primarily reflecting investments to support Connected Fitness and the opening of global Brand House stores in the quarter. Second quarter operating income decreased 8 percent to $32 million compared with $35 million in the prior year's period.

Balance Sheet Highlights

Cash and cash equivalents decreased 43 percent to $171 million at June 30, 2015 compared with $300 million at June 30, 2014. Inventory at June 30, 2015 increased 26 percent to $837 million compared with $662 million at June 30, 2014. Total debt increased to $716 million at June 30, 2015 compared with $197 million at June 30, 2014, primarily reflecting borrowing to fund the two Connected Fitness acquisitions.

Updated 2015 Outlook

The company had previously anticipated 2015 net revenues of approximately $3.78 billion, representing growth of 23 percent over 2014, and 2015 operating income in the range of $400 million to $408 million, representing growth of 13 percent to 15 percent over 2014.

Based on current visibility, the Company expects 2015 net revenues of approximately $3.84 billion, representing growth of 25 percent over 2014 and 2015 operating income in the range of $405 million to $408 million, representing growth of 14 percent to 15 percent over 2014. The 2015 guidance continues to reflect the net dilutive impact from the Connected Fitness acquisitions, as well as the impact of the strong dollar negatively impacting our operating margin within our international businesses.

Brad Dickerson, COO and CFO, Under Armour, Inc., said “The ongoing strength of our Brand and execution of our business plan give us confidence in raising our full year top line outlook. In addition, the confluence of our sports marketing success stories has provided a unique opportunity to drive investment toward areas that we see are key to long-term sustainable growth and we plan to take advantage of this dynamic in the back half of 2015. At the same time, we are increasing our focus on developing sustainable business process improvements and better connecting the components of our value chain to more fully capitalize on our Brand's momentum each season going forward. We look forward to discussing these initiatives and our longer-term business plan in greater detail at our Investor Day on September 16th.”