Comfort is the main criterion for an athlete before choosing any apparel. Athletic-apparel giants are, therefore, constantly innovating more and more new products to create a niche with customers. Founded in 1996 by Kevin Plank, Under Armour Inc (UA, Financial) is an American sports clothing and accessories company. This Baltimore-based company develops sportswear, casual apparel, footwear and a number of sport accessories. Under Armour has its European headquarters in Amsterdam and other additional controlling centers are in Toronto, China, Hong Kong and in Guangzhou, China. The company also sponsors a number of high-level and professional athletes.
Strong second-quarter results
During the second quarter, net revenues increased by 29% and were $784 million (as compared to $610 million in the prior year period).
Net income decreased by 17% in the second quarter of 2015 and was $15 million (as compared to $18 million in the prior year period).
Diluted earnings per share for the second quarter of 2015 were $0.07 compared (which was $0.08 per share in the prior year quarter).
Apparel net revenues increased by 23% and were $515 million during the second quarter (as compared to $420 million in the prior year quarter).
Footwear net revenues increased by 40% and were $154 million (which were $110 million in the prior year period).
Accessories net revenues increased by 39% and were $83 million (as compared to $60 million in the prior year period).
Direct-to-consumer net revenues, which represented 32% of total net revenues for the second quarter, grew 33% year over year.
International net revenues, which represented 11% of total net revenues for the second quarter, grew 93% year over year.
Gross margin for the second quarter of 2015 was 48.4% compared with 49.2% in the prior year's period.
Selling, general and administrative expenses as a percentage of net revenues were 44.3% in the second quarter of 2015 compared with 43.5% in the prior year's period.
Second quarter operating income decreased 8% to $32 million compared with $35 million in the prior year's period.
Cash and cash equivalents decreased 43% to $171 million at June 30, compared with $300 million at June 30, 2014.
Inventory at June 30 increased 26% to $837 million compared with $662 million at June 30, 2014.
Outlook
The company expects the following:
- Net revenues of approximately $3.84 billion.
- Operating income to be in the range of $405 million-$408 million.
(Source: Company’s Website)
Strong attributes of the second quarter
- Historic performances.
- Aligning strategy to attack key growth categories.
- Deeper connections with the athlete.
- Supporting own direct-to-consumer capabilities including new Brand House openings across both the U.S. and our International markets.
In news
UA recently entered a long-term partnership with one of the world`s most progressive football clubs, FC St. Pauli. With a distinct identity rooted in the rebellious and passionate spirit of its supporters and local community, FC St. Pauli has established itself as one of the most admired clubs in Germany and global football. Starting in July 2016, the Hamburg-based club will start wearing match day kits, training product and equipment at every age level.
Under Armour and the National Basketball Association (NBA) announced a multiyear global partnership that makes Under Armour the title partner of the NBA Draft Combine and presenting partner of the Jr. NBA, the league's youth basketball program. Under Armour will also team with the league to launch an innovative NBA FIT mobile application powered by the brand's Connected Fitness platform. This new marketing and merchandising agreement represents a significantly expanded partnership between the NBA and Under Armour, a league partner since 2011.
Expectations
UA is currently trying to raise this to 12% by the end of 2016. The company is currently working on increasing the number of stores throughout the world. It is gaining fast results in international markets. It opened a 30,000 square foot Brand House store on the Magnificent Mile in Chicago, while also debuting in Brazil and the Middle East which contributed to the 74% international growth for the quarter.
It has invested around $700 million in the fitness genre in the last three years. The company is surely going to reap benefits from this investment in the future. Footwear and apparel sales are growing consistently. This will go on to add to the company’s better future.
Health and wellness segments are fast growing and UA has more room to grow in these genres. The company plans to take women’s business to around $1 billion by the end of 2016. It is constantly innovating and expanding its women’s segment.
The company is concentrating its focus on areas that are key to long-term sustainable growth and plans to take advantage of this dynamic in the back half of 2015. At the same time, it is increasing focus on developing sustainable business process improvements and better connecting the components of the value chain to more fully capitalize on the Brand's momentum each season going forward.
On a concluding note
Nowadays, activewear is becoming a hot fashion statement. The wearables market is expected to be at $6 billion by the end of 2016. Under Armour is capitalizing on this growing trend by offering highly technical activewear products for men, women and youth. It is emerging as a big player in the sports apparel industry.
With its Connected Fitness community now totalling more than 140 million unique registered users and adding on average more than 100,000 new athletes each day, it is still uncovering the potential of what the world's largest digital health and fitness community can do to build consumer engagement and drive healthier lifestyles.
Under Armour has huge revenue growth, followed by strong financial position. It also has an impressive record of earnings per share growth, compelling growth in net income and solid stock price performance. Through the Acquisitions of Endomondo and MyFitnessPal, combined with the company's existing MapMyFitness Community, it created the world's largest digital health and fitness community with over 120 million unique registered users. UA has always been a great stock and though it is expensive when compared to its peers, it has still more room to grow in the near future.
It has a strong historical performance and is constantly building on its reputation. UA reported incredible second-quarter results in 2015 with revenues constantly increasing in different departments. The athletic apparel industry has always been among the hot picks. UA has plenty of room to grow and is in a better position to offer increased shareholder returns. There is a lot of potential in this company.
