Nine years after going public and on the verge of crossing the $3 billion revenue milestone, Under Armour Inc. is planning on boosting its international revenues to more than half the business.
“We believe that our brand is so much greater than the $3 billion we’re projecting this year,” the ever-bullish Kevin Plank, founder and chief executive officer, told analysts on a conference call Thursday. “Our international business will still be less than 10 percent of our total revenues for 2014, and we foresee a day where it is at least half of our business. Footwear will be less than 15 percent of the business in 2014, and we can envision that it can be larger than our apparel business someday. Our women’s business, which is over $500 million today, is still less than half the size of our men’s business, and we still believe it should be as big or bigger. And the opportunity and appetite around the world for Under Armour is abundant.”
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In the third quarter, profits grew more than expected as the company continued to generate double-digit increases in overall revenues and its apparel, footwear and accessories segments. International business continued to gain traction, with sales outside of North America — aided by the launch of e-commerce sites in the U.K., Germany and France — more than doubling to $90.3 million from $44.3 million in the year-ago quarter.
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In the three months ended Sept. 30, the Baltimore-based marketer of performance-oriented apparel generated net income of $89.1 million, or 41 cents a share, above the 40-cent earnings per share expected, on average, by analysts, and 22.4 percent above the $72.8 million, or 34 cents, reported in the comparable quarter of 2013. Revenues were up 29.7 percent to $937.9 million from $723.1 million in the year-ago period. Analysts on average expected sales of $925.8 million in the quarter. Gross margin increased to 49.6 percent of sales from 48.4 percent a year ago.
Apparel sales were up 25.6 percent to $704.6 million, footwear sales up 50 percent to $121.6 million and accessories sales up 32 percent to $84.9 million. On the international front, North America’s share of revenues was 90.4 percent, down from the 93.9 percent share in last year’s period.
Plank said the company continues to benefit from “the continued strength of the athletic cycle” as well as its strategy to diversify “more evenly across product categories and geographies. The best evidence of that is in the performance of our footwear and international businesses over the first nine months of 2014,” he said.
Plank said footwear and international have added “nearly $200 million to our growth through the first nine months of this year, and together accounted for 35 percent of our total growth year-to-date. What’s more encouraging than the actual numbers is the strength of the platforms we are building in these businesses that will lay the foundation for sustainable growth in 2015 and beyond.”
The company operates 80 stores around the world and expects to add another 100 next year, Plank said.
He noted that the company has had the most success when it builds its own team in international markets. As an example, he cited Europe, a market Under Armour entered in 2006. It got off to a rocky start, but by bringing in a seasoned executive to oversee the business, the brand is on track to exceed $100 million in revenue for the first time this year, he revealed.
Footwear is also a bright spot for the company, he said, noting that the business is expected to achieve sales of more than $400 million this year with strength in running and basketball.
Speaking of apparel’s 25.6 percent growth rate during the quarter, Plank said the new I Will What I Want ad campaign with ballerina Misty Copeland and model Gisele Bündchen “immediately struck a chord with women. The campaigns drove tremendous traffic to our e-commerce site, primarily women, 70 percent of which were new consumers to Under Armour.”
The company lifted its guidance for full-year revenues to $3.03 billion from the previous range of between $2.98 billion and $3 billion and said operating income, expected to grow between 29 and 30 percent, is now expected to be up about 31 percent.
Year-to-date profits rose 22.6 percent to $120.3 million, or 55 cents a diluted share, while sales rose 32.7 percent to $2.19 billion.