Save 75% - Only $49.99 for 1 full year! digitalPLUS subscription offer ends 12/1
Business

Under Armour exceeds earnings expectations in first quarter

New ProductsUnder Armour Inc.BasketballNon-durable Goods Industry

Under Armour launched a new marketing plan earlier this year, touting its up-and-coming athletes and most innovative products in an intense but short burst they called “a brand holiday.”

It appears to have paid off.

The Baltimore-based athletic apparel maker delivered better than expected financial results for the three months ended March 31.

Under Armour’s income of 7 cents per share income topped analysts’ consensus estimates of 3 cents a share as its revenue jumped 23 percent.

Shares of Under Armour closed at $56.41 a share, up 74 cents or 1.3 percent in New York Stock Exchange trading.

The company’s income did drop 47 percent, to $7.8 million in the January-to-March quarter from $14.7 million in the same period a year ago, but the company attributed that to the planned marketing expenditures.

Under Armour continues to work to broaden its brand’s appeal with consumers, focusing on women’s apparel and shoes.

“I think the broad take away is that the growth was based on the diversity of the offerings,” said Andrew Burns, a vice president and senior research analyst for D.A. Davidson & Co., a Montana-based brokerage house. “There wasn’t one standout category.”

On a conference call with analysts, Under Armour CEO and founder Kevin Plank attributed the growth to several factors, including the brand holiday and the Alter Ego line of gear, which revolves around comic book heroes and has sold well to adult men. An increase in the range of fleece offerings and the popularity of a new running shoe technology called Spine also pushed sales, he said.

Overall revenue increased 22 percent to $346 million from $283 million. Revenue from apparel, which accounts for 75 percent of Under Armour's sales, increased more than 20 percent for the 14th straight quarter.

Yet company officials focused much of their discussion on growth in its much-maligned footwear sector, where it saw a 27 percent increase in sales over 2012. Plank put co-founder Kip Fulks in charge of footwear to re-energize the effort, and prominently displayed the company’s full range of shoes in its new Brand House store in Harbor East.

Under Armour has built a faithful consumer following in the footwear areas it originally focused on, football and baseball cleats. Running and basketball shoes weren’t introduced until 2009 and 2010 respectively, and Plank said he feels those categories are heading on the same trajectory.

According to Matt Powell, an analyst with SportsOneSource, Under Armour’s sales of running shoes in March more than doubled but still only represented 2.8 percent of the total market. Under Armour has 19 percent of the cleat market, Powell said, and just 0.4 percent of the basketball market. Plank said the company is focused on establishing its “authenticity” with basketball players before expanding the line.

“Certainly over time the shoe performance has been disappointing,” Burns said. “But they have the right approach. They’re not going to win with Nike’s playbook. They don’t have Nike’s resources. This is a better plan.”

Plank dubbed the new Brand House a success, saying it had helped the company understand what customers wanted. He was careful to cast the store as a corollary to the company’s partnerships with big-box stores such as Dick’s Sporting Goods and Sports Authority, where Under Armour continues to fight for prime retail space.

Analysts pressed Plank to discuss the company’s strategy outside of the United States, where its growth has been slow.

Burns, who upgraded the stock earlier this week based on the spread of new product offerings, said he believes Under Armour won’t see significant growth internationally until 2015. While Under Armour earned a strong reputation by creating the compression market in the United States, Nike and Adidas were able to introduce that gear to the rest of the world.

Plank said he hoped Under Armour had reached a “tipping point” in Europe, and said the company needed to continue investing in its international operations with the goal of “evolving the Under Armour business from being a North American company who’s simply selling products in other countries to truly embracing being an international company.”

chris.korman@baltsun.com

twitter.com/chriskorman

Copyright © 2014, The Baltimore Sun
Related Content
New ProductsUnder Armour Inc.BasketballNon-durable Goods Industry
Comments
Loading