Under Armour Inc. reported net earnings in the third quarter rose 27.6 percent on a 22.2 percent revenue gain. Both earnings and revenues topped Wall Street’s targets. The gains were again led by footwear, ahead 42 percent, with apparel and accessories both expanding 18 percent.

Net revenues increased 22 percent in the third quarter of 2016 to $1.47 billion compared with net revenues of $1.20 billion in the prior-year period. Wall Street’s consensus target had been $1.45 billion.

On a currency-neutral basis, net revenues increased 23 percent compared with the prior-year period. Operating income increased 16 percent in the third quarter of 2016 to $199 million compared with $171 million in the prior-year period.

Net income increased 28 percent in the third quarter of 2016 to $128 million compared with $100 million in the prior-year period, and diluted earnings per share for the third quarter of 2016 were 29 cents a share compared with 23 cents in the prior-year period. Wall Street’s consensus target had been 25 cents.

During the third quarter, wholesale net revenues grew 19 percent year over year to $1.01 billion compared to $850 million in the prior-year period, while direct-to-consumer net revenues grew 29 percent year over year to $408 million compared to $316 million in the prior-year period. North America net revenues for the third quarter grew 16 percent year over year. International net revenues, which represented 15 percent of total net revenues for the third quarter, grew 74 percent year over year, or 80 percent on a currency-neutral basis.

Within product categories, apparel net revenues increased 18 percent to $1.02 billion compared with $866 million in the same period of the prior year, led by growth in men’s training, women’s training, golf and team sports. Footwear net revenues increased 42 percent to $279 million from $196 million in the prior-year period, driven by strong growth in running and basketball. Accessories net revenues increased 18 percent to $122 million from $104 million in the prior-year period, driven primarily by growth in bags and headwear.

Kevin Plank, chairman and CEO of Under Armour Inc., stated, “Under Armour is a growth company and our ambitions for the brand have never been higher. This marks our 26th consecutive quarter of 20-plus percent revenue growth, demonstrating the strength of the Under Armour brand. From the Olympic Games in Rio to the launch of Under Armour Sportswear at New York Fashion Week, the Under Armour Brand continues to extend its reach to new consumers while remaining authentic and rooted in sport. In the third quarter, our key strategies and investments to diversify our portfolio on a global scale were evident across categories, channels and geographies. In running, we experienced strong global demand for our Slingride and Bandit 2 footwear styles, showcasing the continued expansion of our premium $100+ footwear offerings. Within direct-to-consumer we launched three new e-commerce sites, bringing our total to 30 global sites, as we focus on expanding brand experience and premium offerings for consumers wherever they shop. And finally, we hosted our second tour through Asia with Stephen Curry, where the brand continues to resonate and drive incredible momentum in new markets.”

Gross margin for the third quarter of 2016 was 47.5 percent compared with 48.8 percent in the prior-year period, primarily reflecting negative impacts from the timing of liquidation, increased promotions and foreign exchange rates, partially offset by continued product cost margin improvements. Selling, general and administrative expenses grew 20 percent to $499 million compared with $416 million in the prior-year period, primarily driven by investments in direct-to-consumer and overall headcount to support the company’s strategic initiatives.

Balance Sheet Highlights
Cash and cash equivalents was $180 million at September 30, 2016 compared with $159 million at September 30, 2015. Inventory on September 30, 2016 increased 12 percent to $971 million compared with $867 million at September 30, 2015. Total debt increased 19 percent to $1.07 billion on September 30, 2016 compared with $902 million at September 30, 2015.

Updated Outlook
Based on current visibility, the company continues to expect 2016 net revenues of approximately $4.925 billion, representing growth of 24 percent over 2015, and 2016 operating income of $440 million to $445 million, representing growth of 8 percent to 9 percent over 2015. Below the operating line, the company expects interest expense of approximately $30 million, an effective full-year tax rate of approximately 35.5 percent, and fully diluted weighted average shares outstanding of approximately 446 million.

The company will provide an update on its longer-term guidance on the third-quarter earnings conference call.

Plank concluded, “Over the past twenty years we have established ourselves as a premium global brand with a track record of strong financial results. Looking back over the past nine months, it has never been more evident that we are at a pivotal moment in time, where the investments we are making today will fuel our growth and drive our industry leadership position for years to come. As a growth company with an expanding global footprint and businesses like footwear and women’s each approaching a billion dollars this year, we have never been more focused on the long-term success of our brand.”

Photo courtesy Under Armour