Under Armour, Inc. reported earnings jumped 50.7% in the fourth quarter, to $22.9 million, or 44 cents a share, from $15.2 million, or 30 cents, a year ago. Net revenues increased 35.6% to $301.2 million from $222.2 million in the fourth quarter of 2009.
Fourth quarter apparel net revenues increased 32% to $254.0 million compared with $192.1 million in the same period of the prior year, driven by sustained momentum across each of the Men's, Women's, and Youth apparel businesses. Direct-to-Consumer net revenues, which represented 33% of total net revenues for the quarter, grew 56% year-over-year during the fourth quarter. Footwear net revenues in the fourth quarter of 2010 increased to $21.9 million from $8.7 million in the fourth quarter of 2009, primarily due to the introduction of basketball shoes and growth in baseball cleats.
Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, “We completed a successful 2010, surpassing $1 billion in annual net revenues and generating EPS growth of 46%. Our results demonstrate the strength of our Brand and we will carry this momentum forward by broadening our consumer reach and delivering innovative product. Our multi-channel distribution platform, heightened by our Direct-to-Consumer strategy, continues to evolve and provides an effective vehicle both to reach new consumers and better service our current consumers. We are proud to be introducing the next chapter in Under Armour innovation as we introduce the world's first Charged Cotton T-shirt this spring.”
Gross margin for the fourth quarter of 2010 was 51.7% compared with 51.2% in the prior year's quarter primarily due to a higher percentage of revenue from our higher margin Direct-to-Consumer channel and lower footwear markdowns compared to the same period in 2009. Selling, general and administrative expenses as a percentage of net revenues were 40.0% in the fourth quarter of 2010 compared with 39.1% in the fourth quarter of 2009 as a result of continued expansion of the Factory House stores and higher performance bonus expense given strong results. Marketing expense for the fourth quarter of 2010 was 11.1% of net revenues compared with 11.3% in the prior year. For the fourth quarter, operating income grew 31% to $35.2 million compared with $26.9 million in the prior year's period. EPS for the quarter benefited approximately $0.04 from a lower than expected effective income tax rate of 33.4%, primarily resulting from a research and development tax credit renewed in December 2010 and continuing tax planning strategies.
Review of Full Year Operating Results
For the full year 2010, net revenues increased 24% to $1.064 billion compared with $856.4 million in the prior year, ahead of the company's prior outlook of $1.030 billion to $1.035 billion. Diluted earnings per share for the full year increased 46% to $1.34 per share on weighted average common shares outstanding of 51.3 million compared with $0.92 per share on weighted average common shares outstanding of 50.7 million in the prior year, ahead of the company's prior guidance of $1.23 to $1.24.
Apparel net revenues increased 31% to $853.5 million compared with $651.8 million in the prior year, driven by strength across the Men's, Women's, and Youth apparel businesses. Direct-to-Consumer net revenues, which represented 23% of total net revenues for the year compared to 18% in 2009, grew 57% over the prior year. Footwear net revenues declined 7% to $127.2 million during 2010 compared to $136.2 million in 2009.
Gross margin for 2010 was 49.9% compared with 47.9% in 2009 primarily due to a higher percentage of revenue from our higher margin Direct-to-Consumer channel, lower sales returns and markdowns, and a more favorable year-over-year impact of inventory reserves. Selling, general and administrative expenses as a percentage of net revenues were 39.3% for 2010 compared with 37.9% for 2009, reflecting the continued expansion of the Factory House stores, increased investments in product innovation and supply chain, and higher corporate services costs. Marketing expense for 2010 was 12.0% of net revenues compared with 12.7% in the prior year. Operating income grew 31.8% to $112.4 million in 2010 compared with $85.3 million in the prior year.
Balance Sheet Highlights
Cash and cash equivalents increased 9% to $203.9 million at December 31, 2010 compared with $187.3 million at December 31, 2009. The company had no borrowings outstanding under its $200 million revolving credit facility at December 31, 2010. Inventory at year-end increased 45% to $215.4 million compared with $148.5 million at December 31, 2009. Net accounts receivable increased 29% to $102.0 million at December 31, 2010 compared with $79.4 million at December 31, 2009.
Updated 2011 Outlook
Based on current visibility, the company now expects 2011 net revenues in the range of $1.33 billion to $1.35 billion, representing growth of 25% to 27% over 2010 and ahead of prior guidance of growth at the higher end of its 20% to 25% long-term growth target. The company expects operating income in the range of $143 million to $147 million, representing growth of 27% to 31% over 2010. The company expects an effective tax rate of approximately 40.0% for the full year compared to an effective tax rate of 37.1% for 2010. Finally, the company anticipates fully diluted weighted average shares outstanding of approximately 52.3 million to 52.5 million for 2011.
Plank concluded, “We are proud of the results posted on the scoreboard in 2010. One billion dollars in revenue is a solid foundation and opportunities remain abundant both domestically and across the globe. We have assembled a winning leadership team and are making the right investments to enhance our near-term growth opportunities in wholesale apparel and Direct-to-Consumer, while continuing to build our long-term footwear and global platforms.”
|
CONSOLIDATED STATEMENTS OF INCOME |
||||||||||||
|
Quarter Ended December 31, |
Year Ended December 31, |
|||||||||||
|
2010 |
% of Net Revenues |
2009 |
% of Net Revenues |
2010 |
% of Net Revenues |
2009 |
% of Net Revenues |
|||||
|
Net revenues |
$ 301,166 |
100.0% |
$ 222,217 |
100.0% |
$1,063,927 |
100.0% |
$ 856,411 |
100.0% |
||||
|
Cost of goods sold |
145,588 |
48.3% |
108,365 |
48.8% |
533,420 |
50.1% |
446,286 |
52.1% |
||||
|
Gross profit |
155,578 |
51.7% |
113,852 |
51.2% |
530,507 |
49.9% |
410,125 |
47.9% |
||||
|
Selling, general and administrative expenses |
120,388 |
40.0% |
86,919 |
39.1% |
418,152 |
39.3% |
324,852 |
37.9% |
||||
|
Income from operations |
35,190 |
11.7% |
26,933 |
12.1% |
112,355 |
10.6% |
85,273 |
10.0% |
||||
|
Interest expense, net |
(590) |
(0.2%) |
(435) |
(0.2%) |
(2,258) |
(0.3%) |
(2,344) |
(0.3%) |
||||
|
Other expense, net |
(142) |
(0.1%) |
(258) |
(0.1%) |
(1,178) |
(0.1%) |
(511) |
(0.1%) |
||||
|
Income before income taxes |
34,458 |
11.4% |
26,240 |
11.8% |
||||||||
