Under Armour Flexes Its Muscles

Firm introduces new products and concepts as fourth-quarter results fly past estimates.

An image from Under Armour's commercial.

Under Armour picked the right day to host a multimedia presentation to introduce its newest product innovations and commercials. The Thursday event, held in Vanderbilt Hall of Grand Central Terminal, which has been transformed into an Under Armour House of Innovation through Saturday, came on the same day that the company reported a double-digit jump in earnings for the fourth quarter and reached more than $2 billion in annual sales.

This story first appeared in the January 31, 2014 issue of WWD.  Subscribe Today.

“This is a very good day for Under Armour,” said founder and chief executive officer Kevin Plank. “We didn’t plan it that way, but it turned out that way.”

In the three months ended Dec. 31, the Baltimore-based marketer of athletic apparel, footwear and accessories registered net income of $64.2 million, or 59 cents a diluted share, 28 percent above the $50.1 million, or 47 cents, reported for the final quarter of 2012. Analysts, on average, expected earnings per share of 53 cents.

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Revenues spiked 35 percent to $682.8 million from $505.9 million a year ago as apparel sales grew 34.9 percent to $545.5 million, footwear sales were up 23.8 percent to $55.4 million and accessories sales rose 51.7 percent to $64.6 million. The analysts’ consensus estimate for revenues was $619.9 million.

The company’s shares closed up $19.54, or 22.9 percent, at $104.76 on the New York Stock Exchange after hitting a 52-week high of $106.65 in trading earlier in the day.

Calling Under Armour “a growth company,” Plank said much of the growth will come from outside the U.S. While revenues outside North America accounted for just 5.5 percent of fourth-quarter sales, Plank said the plan is that “someday, more than half our revenue will come from outside the U.S.” Continued growth in North America will allow the brand “to fulfill our global ambitions.”

Pointing to the 15th straight quarter of at least 20 percent total growth, Plank said it took Under Armour 15 years to reach $1 billion in sales and just over two years to double that figure. And he envisions even more accelerated sales gains in the future. “We’re a $10 billion brand doing $2 billion in sales,” he said.

In 2013, Under Armour opened its first two Brand House retail stores; made its first acquisition, MapMyFitness, and continued to invest in innovations in women’s, footwear and international.

Now the focus has turned to New York. Plank said the brand opened an office in Chelsea earlier this month and will unveil a 14,000-square-foot Brand House retail store at Houston and Prince Streets in SoHo in April.

Plank stressed that Under Armour’s mission remains to make athletes better. Its newest move in that direction is the February launch of the SpeedForm Apollo running shoe.

Plank said the shoe, which will be available Feb. 28 and retail for $100, “may be our defining product as a company.”

He then premiered the commercials for the product that will begin airing on Feb. 22 during the NFL Network’s coverage of the Scouting Combine. The spot, “This Is What Fast Feels Like,” was directed by Peter Berg of “Lone Survivor” and “Friday Night Lights” fame and was shot at an airbase in California.

In the quarter, direct-to-consumer sales expanded 36 percent to about 39 percent of quarterly sales, or about $266.3 million. Gross margin in the quarter rose 100 basis points to 51.3 percent of sales from 50.3 percent a year ago.

For the full year, net income was up 26.1 percent to $162.3 million, or $1.50 a diluted share, as revenues expanded 27.1 percent to $2.33 billion.

North American revenues rose 36.6 percent in the quarter and 27 percent for the year, to $645.1 million and $2.19 billion, respectively, while sales in other markets were up 11.9 percent in the quarter, to $37.6 million, and 27.8 percent for the year, to $138.3 million.

In 2014 guidance, the company said it expected sales of between $2.84 billion and $2.87 billion versus the current analysts’ consensus estimate of $2.77 billion.