Under Armour, Inc. UA reported third-quarter 2015 earnings of 45 cents a share that came a penny ahead of the Zacks Consensus Estimate, and jumped 9.8% from the year-ago quarter on the back of a sturdy top line. This prompted management to provide an upbeat outlook, despite the dilutive impact from the recent acquisitions of Connected Fitness along with foreign exchange fluctuations.
Aided by continued strong performance of the Apparel, Footwear and Accessories categories, total revenue came in at $1,204.1 million, up 28.4% year over year and ahead of the Zacks Consensus Estimate of $1,173 million. On constant currency basis, revenues grew 31%.
The company, which competes with giants such as Adidas and Nike, Inc. NKE in the sports apparel business, is keen on expanding its footprint and enhancing brand recognition to get an edge, and the deal with rising athletes including basketball star Stephen Curry and golfer Jordan Spieth provides platform to showcase its brands.
Under Armour’s largest product category, Apparel, once again reported strong sales. Apparel sales jumped 22.8% to $865.5 million driven by improved product offerings in baselayer and the expanded Storm innovation platform.
Footwear net revenue soared 61.4% to $196.3 million during the quarter on the back of sustained product expansion in the running, basketball and training categories. Net revenue in the Accessories category advanced 21.9% to $103.6 million buoyed by new product introductions in the bags category, while Licensing revenue grew 9% year over year to $24.3 million.
The company’s Connected Fitness segment reported massive year-over-year growth of 221% to $14.4 million. This was driven by the acquisitions of Endomondo and MyFitnessPal. These buyouts, along with its existing MapMyFitness and UA RECORD suite of applications, helped the company to form one of the largest digital health and fitness communities, with over 150 million unique registered users.
Under Armour recorded a 28% surge in direct-to-consumer net revenue during the quarter, representing 26% of the total revenue. Meanwhile, international net revenue increased 52%, making for about 11% of net revenue.
Gross profit escalated 26.2% to $587.2 million. However, gross margin contracted 80 basis points to 48.8% due to the adverse impact of strong U.S. dollar and sales mix. Under Armor’s operating income grew 17.3% to $171.4 million, whereas operating margin shriveled 140 bps to 14.2%.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $159.4 million, down 36% from the prior-year period, while total debt was $904.7 million compared with $191.6 million in the prior-year period. Borrowings for the Connected Fitness acquisitions led to a massive increase in debt. Shareholders' equity at the end of the quarter was $1,535.3 million.
Guidance
Strong demand for the company’s product coupled with better execution of strategy led management to raise its 2015 revenue forecasts. The company now projects net revenue of $3.91 billion, as against $3.84 billion projected earlier, reflecting a 27% growth from 2014. Operating income is expected to be $408 million, representing a 15% growth year over year. Earlier operating income was expected to be in the band of $405-$408 million.
Zacks Rank
Under Armour currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the retail sector include Guess' Inc. GES and G-III Apparel Group, Ltd. GIII, both sporting a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment