Under Armour, Inc. reported revenues increased 42.2 percent in the second quarter ended June 30, to $291.3 million from $204.8 million in the prior year’s period. Net income increased 77.1 percent to $6.2 million, or 12 cents a share, from $3.5 million, or 7 cents, a year ago.

Second quarter apparel net revenues increased 36 percent to $204.8 million compared with $150.2 million in the same period of the prior year, driven by continued strength across each of the Men’s, Women’s, and Youth apparel businesses. Direct-to-Consumer net revenues, which represented 27 percent of total net revenues for the second quarter, grew 81 percent year-over-year. Second quarter footwear net revenues increased 31 percent to $46.9 million from $35.8 million in the prior year’s period. Second quarter accessories net revenues increased 266 percent to $32.4 million from $8.9 million in the prior year’s period, primarily driven by the transition of our previously licensed hats and bags business in-house which commenced January 2011.

Kevin Plank, chairman, CEO, and president of Under Armour, Inc., stated, “We recently outlined our strategy to double our net revenues to over $2.1 billion by 2013 and our second quarter performance is indicative of the increased demand for the Under Armour Brand that will drive us there. We continue to be the thought leaders in all things performance, building off of successes like our launch of Charged Cotton and the development of our next product franchise, Storm Fleece. Our brand communication will expand in the coming months as we build our voice in footwear with Micro G cushioning technology. We will also begin to implement compelling new shop-in-shop formats with our existing retail partners. 2011 is a year where we are on the offensive to better meet the high expectations of our consumers, and we will continue to invest in operational initiatives that will help build a multi-billion dollar global platform.”

Gross margin for the second quarter of 2011 was 46.3 percent compared with 48.8 percent in the prior year’s quarter primarily due to less favorable apparel product margins and a lower year-over-year mix of net revenues from our licensing businesses, partially offset by a higher percentage of net revenues from our higher margin Direct-to-Consumer channel. Selling, general and administrative expenses as a percentage of net revenues were 42.4 percent in the second quarter of 2011 compared with 45.4 percent in the prior year’s period, reflecting leverage of corporate services and marketing expenses. Marketing expenses for the second quarter of 2011 were 11.7 percent of net revenues compared with 13.4 percent in the prior year’s quarter. Second quarter operating income grew 65 percent to $11.4 million compared with $6.9 million in the prior year’s period.

For the first six months of 2011, net revenues increased 39.1 percent to $604.0 million compared with $434.2 million in the prior year. Net income for the first six months of 2011 increased 72 percent to $18.4 million compared with $10.7 million in the same period of 2010. Diluted earnings per share for the first six months of 2011 were $0.35 on weighted average common shares outstanding of 52.5 million compared with $0.21 per share on weighted average common shares outstanding of 51.0 million in the prior year.

Balance Sheet Highlights

The company had cash and cash equivalents of $119.7 million and had no borrowings outstanding under its $300 million revolving credit facility at June 30, 2011. Inventory at June 30, 2011 increased 74 percent to $311.1 million compared with $179.2 million at June 30, 2010. As the company had previously indicated, the inventory growth reflects in part the company’s efforts to better service anticipated consumer demand in 2011, as well as the transition of the company’s hats and bags business in-house and an earlier planned build of ColdGear apparel for the 2011 Fall/Winter season.

Updated 2011 Outlook

The company had previously anticipated 2011 net revenues in the range of $1.37 billion to $1.39 billion, representing growth of 29 percent to 31 percent over 2010, and 2011 operating income in the range of $149 million to $153 million, representing growth of 33 percent to 36 percent over 2010. Based on current visibility, the company now expects 2011 net revenues in the range of $1.42 billion to $1.44 billion, representing growth of 33 percent to 35 percent over 2010, and 2011 operating income in the range of $155 million to $160 million, representing growth of 38 percent to 42 percent over 2010. The company continues to expect an effective tax rate of approximately 40.0 percent for the full year compared to an effective tax rate of 37.1 percent for 2010. Finally, the company anticipates fully diluted weighted average shares outstanding of approximately 52.5 million to 52.7 million for 2011, unchanged from prior guidance.

Plank concluded, “The UA Brand has never been stronger and the momentum we are seeing is broad-based across gender and distribution. Our rapid growth is demonstrative of the power of our brand and were focused on building our operational platform to better align with the long-term opportunity for Under Armour.”

CONSOLIDATED STATEMENTS OF INCOME




Quarter Ended

June 30,


Six Months Ended

June 30,



2011

% of Net Revenues


2010

% of Net Revenues


2011

% of Net Revenues


2010

% of Net Revenues















Net revenues

$  291,336

100.0%


$  204,786

100.0%


$   604,035

100.0%


$  434,193

100.0%


Cost of goods sold

156,557

53.7%


104,860

51.2%


324,205

53.7%


226,636

52.2%


      Gross profit

134,779

46.3%


99,926

48.8%


279,830

46.3%


207,557

47.8%















Selling, general and

 administrative expenses

123,421

42.4%


93,034

45.4%


247,330

40.9%


187,081

43.1%















      Income from operations

11,358

3.9%


6,892

3.4%


32,500

5.4%


20,476

4.7%















   Interest expense, net

(297)

(0.1%)


(580)

(0.3%)


(876)

(0.2%)


(1,126)

(0.2%)


  Other expense, net           

(362)

(0.1%)


(167)

(0.1%)


(872)

(0.1%)


(852)

(0.2%)















&nb

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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