Under Armour, Inc. reported revenues increased 34 percent in the second quarter of 2014 to $610 million compared with net revenues of $455 million in the prior year's period. Net income in the second quarter of 2014 of $18 million was unchanged compared with the prior year's period, largely reflecting the planned timing of marketing and innovation expenses. Diluted earnings per share for the second quarter of 2014 were 8 cents, unchanged from the prior year's period.
Wall Street's consensus estimate had been 7 cents a share.
Second quarter apparel net revenues increased 35 percent to $420 million compared with $310 million in the same period of the prior year, driven by expanded offerings in categories such as golf, outdoor, running, training, and women's studio. Second quarter footwear net revenues increased 34 percent to $110 million from $82 million in the prior year's period, led by new introductions in running. Second quarter accessories net revenues increased 18 percent to $60 million from $51 million in the prior year's period, primarily driven by headwear. Direct-to-Consumer net revenues, which represented 31 percent of total net revenues for the second quarter, grew 38 percent year-over-year. International net revenues, which represented 8 percent of total net revenues for the second quarter, grew 80 percent year-over-year.
Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, “The broad-based momentum that we have been experiencing recently showed no signs of stopping during the second quarter. While we continued to add more dimension to our largest growth driver in Apparel, we were particularly encouraged by the brand response we are seeing in both our Footwear and International businesses. From our latest pinnacle football cleat, the Highlight ClutchFit, to the successful SpeedForm running initiative, our footwear is clearly resonating with consumers and we are well positioned to expand these platforms in the seasons ahead. In International, we are executing in all regions and are proud of key second quarter milestones such as our initial product launch in Brasil and partnering with key distributors to open the first Brand House stores in Panama, the Philippines and Singapore.”
Gross margin for the second quarter of 2014 was 49.2 percent compared with 48.3 percent in the prior year's quarter, primarily driven by favorable year-over-year sales mix and product margins. Selling, general and administrative expenses as a percentage of net revenues were 43.5 percent in the second quarter of 2014 compared with 41.2 percent in the prior year's period, primarily driven by the timing of marketing expenses and investments in product innovation. Second quarter operating income increased 7 percent to $35 million compared with $32 million in the prior year's period.
Cash and cash equivalents increased 34 percent to $300 million at June 30, 2014 compared with $224 million at June 30, 2013. Long-term debt including current maturities increased to $197 million at June 30, 2014 compared with $55 million at June 30, 2013. In May 2014 the company closed on a $150 million term loan and paid off $100 million drawn on the company's revolving credit facility. Inventory at June 30, 2014 increased 35 percent to $662 million compared with $491 million at June 30, 2013.
Updated 2014 Outlook
The company had previously anticipated 2014 net revenues in the range of $2.88 billion to $2.91 billion, representing growth of 24 percent to 25 percent over 2013, and 2014 operating income in the range of $331 million to $334 million, representing growth of 25 percent to 26 percent over 2013. Based on current visibility, the company expects 2014 net revenues in the range of $2.98 billion to $3.0 billion, representing growth of 28 percent to 29 percent over 2013, and 2014 operating income in the range of $343 million to $345 million, representing growth of 29 percent to 30 percent over 2013. The company currently anticipates an effective tax rate of approximately 40.5 percent for the full year, compared to 37.8 percent for 2013, and fully diluted weighted average shares outstanding of approximately 218 million for 2014.
Plank concluded, “The enhanced visibility and execution of both our Footwear and International growth engines during the first half of 2014 gives us greater conviction in achieving our full year financial targets. At the same time, we are better positioned to broaden our consumer reach this quarter as we launch new relationships with the U.S. Naval Academy, the University of Notre Dame, as well as the Cruz Azul Fútbol Club in Mexico. In addition, this month we are launching our second Brand Holiday of 2014, our first global campaign dedicated to women and one that will reinforce our commitment to build out this important growth driver. We are also extremely excited with our progress in Connected Fitness, where we just surpassed 27 million users and are adding nearly one million new users each month, as well as forging relationships that will empower this community in the years ahead.”