By Liz F. Kay, The Baltimore Sun
6:52 PM EDT, October 25, 2011
While Under Armour's core apparel lines drove strong revenue results in the third quarter, the company is preparing to launch even more products, including sneakers, as well as to enter new markets, such as China, company officials said Tuesday while announcing earnings.
"We're seeing great success in our two-fold strategy of innovating to drive better performance product with higher prices in our core while expanding our reach beyond our core with new products," President and CEO Kevin Plank told investors during a conference call.
The Baltimore-based athletic apparel company updated its net revenue expectation for 2011 to range from $1.46 billion to $1.47 billion, up 37 percent to 38 percent over 2010. Previously, the company had estimated annual revenues in the range of $1.42 billion to $1.44 billion.
Estimates of operating income for this year now range from $159 million to $162 million, up 42 percent to 44 percent over last year and higher than earlier predictions, which had ranged from $155 million to $160 million.
Net profits increased 42 percent to $466 million in the three months that ended Sept. 30, compared with $329 million during the same period last year. Net income rose to $45.9 million, or 88 cents per share, up from $34.8 million, or 68 cents last year.
Under Armour's gross margins continued to drop in the third quarter, to 48.4 percent — down more than two percentage points from this time last year.
The company reported that revenue from apparel sales increased by nearly a third, to $363 million in the third quarter, compared with $277 million in the year-earlier period. It was the fourth consecutive quarter with increases that high, Plank said.
Footwear sales for the quarter were $52 million, twice as high as in the similar period in 2010. Under Armour surpassed total 2010 sales by September, which, Plank said, gives the company confidence that its footwear is "resonating with customers."
The company now has three shoes on the market, priced at $70, $90 and $120.
Plank reported that the firm's traction in the footwear market comes from new customers buying Under Armour products at mall stores such as Foot Locker and Finish Line.
"We're certainly not declaring victory, but we're encouraged by what we're seeing," he said.
Plank said that customers were now paying $50 to $75 for an Armour Fleece cotton sweatshirt — and that those customers had previously paid half that for a hoodie.
Customers are also paying $60 to $100 for Under Armour's new weather-resistant cotton fleece, Plank said. The cotton T-shirts and sweatshirts help the company compete in a larger portion of the athletic apparel category, he added.
The company has been able to increase average selling prices at the same time that competitors either have not or could not, Plank said.
Under Armour plans to expand and relaunch its underwear line in department stores such as Nordstrom and has opened 50 "All-American" stores at Dick's Sporting Goods.
In addition, the company plans to open four more "Factory House" stores in the last quarter, bringing the total to 80 by the end of the year.
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