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Under Armour reports first $1 billion sales quarter in company history

Under Armour's quarterly sales topped $1 billion for the first time, the company reported Thursday, as a spike in footwear sales helped the brand beat sales and profit expectations and continue a streak of revenue jumps of at least 20 percent.

The Baltimore-based sports and apparel maker attributed strength in the third quarter to apparel and athletic footwear innovations, the star-power of athletes such as Tom Brady, Misty Copeland, Stephen Curry and Jordan Spieth, and a brand-elevating global marketing campaign, "Rule Yourself," highlighting those athlete endorsers.

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"Anything is possible because of the ever-evolving power of sports," said Kevin Plank, Under Armour chairman and CEO, during a Thursday morning conference call with analysts. "The power of sports is the engine that has fueled our growth since day one, and the reason for confidence in the future."

Revenue soared to $1.2 billion, a 28 percent jump compared with revenue of $938 million during the same period in 2014. It was the 22nd consecutive quarter that sales increased at least 20 percent.

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The company's earnings rose 13 percent to $100 million, or 45 cents per share, from $89 million, or 41 cents per share, during the three months that ended Sept. 30.

Under Armour shares, however, took a beating Thursday over concerns about slimmer margins and high inventory levels. The company's shares fell more than 5 percent, or $5.40 each, to close at $93.75 a share.

Margins, which slipped to 48.8 percent from 49.6 percent, were hurt by the continued strength of the U.S. dollar, the product mix during the quarter and higher shipping costs, said Brad Dickerson, chief operating and chief financial officer.

Results show that "building blocks" are in place for the company to reach its recently revised sales goal of $7.5 billion by 2018, Plank said. The company boosted its outlook for full-year revenues to about $3.91 million, which would represent a 27 percent increase over last year.

"Solid gains across products, regions and channels," drove sales growth during the quarter, said Tuna Amobi, an equity analyst at S&P Capital IQ, in a report. Amobi raised the 12-month target price by $4 per share to $114 per share.

In the third quarter, the brand sold $866 million of apparel, a 23 percent gain, driven mostly by enhanced offerings in baselayer clothing and expansion of the Storm apparel line.

Sales of footwear, a small but fast-growing category, rose 61 percent to $196 million, helped by the expansion of running, basketball and training shoes. The company expects a bump from Saturday's release of NBA star Stephen Curry's second signature basketball shoe, the "Curry Two."

For Under Armour, which produced 30 million pairs of shoes this year, the footwear sales growth is monumental but they still account for just a small slice of an enormous market in which competitors churn out 500 million pairs of shoes each year, Plank told analysts.

"This demonstrates miles of runway in front of us for growth in this one category alone," said Plank.

Toward that end, the brand has been hiring more people dedicated to developing women's shoes. The goal is to make footwear a bigger category than apparel.

Other focuses for expansion include international markets, which now account for 11 percent of sales, fitness technology and manufacturing capabilities through a "make local for local" model, the company said.

When Under Armour went public a decade ago, it was a $281 million seller of mostly compression wear in four countries. At the time fitness technology applications were not available and "the day we would feature a ballerina in a commercial seemed unlikely," Plank said.

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That ballerina, American Ballet Theatre principal Copeland, is featured in the "I Will What I Want" campaign, designed to attract women to the brand and someday push women's sales above the core men's business, as well as the "Rule Yourself" campaign.

The company also is branching out into new apparel categories, including sportswear for outside the gym, pitch, field or court, Plank said. Sportswear sales are not expected to make a difference in revenues in the short term, he said.

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