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Under Armour stock spikes on 13th quarter of at least 20% growth

FashionNew ProductsGlobal ExpansionUnder Armour Inc.Consumers

Sports apparel consumers aren’t the only ones who like what Under Armour is selling. So do investors.

Shares in the Baltimore-based apparel maker spiked 12.2 percent on Thursday after the company announced a 13th quarter in a row of more than 20 percent revenue growth. Under Armour stock ended the day up $7.55 a share at $69.38 in New York Stock Exchange trading.

The rally was driven by both sales and profits that topped expectations.

Under Armour earned $17.6 million in the April-to-June quarter, 163 percent more than its $6.7 million profit in the same quarter in 2012. The income of 16 cents per share topped the consensus analyst estimate of 14 cents.

Revenues for the quarter increased 23 percent year over year to $455 million. The company now predicts it will post revenue of between $2.23 billion and $2.25 billion this year. It had previously said it expected to generate between $2.21 billion and $2.23 billion.

“Our strategy for long-term growth is working,” said Kevin Plank, Under Armour’s president, CEO and founder.

Plank’s message to the investment community Thursday spun away from his recent emphasis on women’s apparel and footwear, returning to where the company began: men’s wear, especially football.

Plank, who carefully crafts Under Armour’s story, wanted to make it clear that the company’s core business is still growing. After spending the first half of the year talking about expanding in new categories and innovation, he delivered a reminder that growth need not come from untapped areas.

“The runway for our U.S. apparel business is long, and we're still in the early stages of where our brand can go,” he said.

Christopher Svezia, an analyst with Susquehanna Financial, said Under Armour’s report revealed few flaws.

Analysts have feared the company would struggle to sell apparel aimed at certain weather conditions if a season is unusually warm or cool, he said, but were convinced by the company’s second-quarter sales that it has found the right balance of inventory.

“There was a lot of negative sentiment going in based on the weather question,” Svezia said. “This put some water on that. There wasn’t really a hint of any concern or issue, while growth potential seems to be there. Still, I’m a little surprised at the reaction — that’s quite a rise.”

Plank's focus on the company's roots could have been expected. Under Armour's second “brand holiday” launched earlier this month with a gritty football commercial influenced by former Ravens linebacker Ray Lewis. It depicts high school players streaming through Baltimore headed toward practice.

The company was clearly paying homage to is roots. Plank played football at the University of Maryland and built his company by persuading former teammates to wear his gear.

He also diverted focus from the company’s expanding direct-to-consumer business — both online and through company-owned stores — and praised retail partners for giving Under Armour more and better floor space.

Plank also discussed the company’s plans for global expansion in 2014. It expects to have more international offices than domestic offices by next year and has targeted countries such as Mexico, Panama and Brazil to drive growth outside the United States. Plank also described a planned store in Shanghai that would be 80 percent focused on educating consumers about sports and equipment and only 20 percent on sales.

He also continued touting the company’s advances in running shoes, saying the reception of its new Speedform line — stitched together at a bra factory to create a more secure fit — was promising.

“On footwear, we’re not declaring victory by any stretch,” he said, “but we certainly have a lot of things moving in the right direction, which gives us confidence we can be as important there as we are in apparel.”

According to SportsOneSource, a sporting goods research firm, Under Armour held 2.1 percent of the U.S. footwear market in June. Only five of the company’s shoes ranked among the top 250 sellers; Nike and its affiliated brands made up two-thirds of the top 250.

SportsOneSource research also showed Under Armour has lost market share in the compression apparel market — its original focus — going from 40.8 percent in June 2012 to 30.7 percent this June. But it continues chasing Nike in the overall sports apparel market, gaining nearly two percentage points year-over-year to hold 13.6 percent of the U.S. market compared with Nike’s 29.7 percent. Third-ranked Adidas dropped from 8.2 percent last year to 7.1 percent in 2013.

“Bottom line, it continues to be one of the best brand stories and growth opportunities in this space,” Svezia said of Under Armour.

Copyright © 2014, The Baltimore Sun
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