Under Armour Beats on Q3 Earnings & Revenues, Guides Up

Under Armour Inc. (UA) posted impressive third-quarter results and provided an upbeat outlook for 2014. This sports apparel and footwear retailer and a Zacks Rank #2 (Buy) stock delivered earnings of 41 cents a share that came a penny ahead of the Zacks Consensus Estimate and surged 20.6% from the prior-year period.

Under Armour, Inc - Earnings Surprise | FindTheBest

Aided by strong performance of the Apparel, Footwear and Accessories categories, total revenue came in at $937.9 million, up 29.7% year over year and ahead of the Zacks Consensus Estimate of $928 million. However, the rate of top-line growth decelerated from 34.1% achieved in the second quarter. This led the shares to decline 4.2% during the pre-market trading hours.

Under Armour’s largest product category, Apparel, once again witnessed strong sales. Apparel sales jumped 25.6% to $704.6 million, reflecting enhanced offerings and innovations across golf, training and outdoor.

Footwear net revenue soared 50.1% to $121.6 million during the quarter due to the newly introduced products in running and basketball. Net revenue in the Accessories category advanced 32% to $84.9 million led by headwear, bags, and gloves, while Licensing and Other revenues elevated 59.1% year over year to $26.8 million.

Under Armour announced a 35% surge in direct-to-consumer net revenue during the quarter, representing 26% of the total net revenue. Meanwhile, International net revenues increased 94%, making for about 9% of total net revenue.

Gross profit escalated 32.9% to $465.3 million, while gross profit margin expanded 120 basis points (bps) to 49.6%, attributable to a favorable sales mix and increased import duties in the year-ago quarter.

Following strong sales, Under Armour’s operating income improved 20.9% to $146.1 million, while operating margin contracted 110 bps to 15.6%.

Other Financial Details

Under Armour ended the quarter with cash and cash equivalents of $249.5 million, up 34% from the prior year, while long-term debt inclusive of current maturities was $192 million compared with $54 million in the prior-year period. Shareholders' equity at the end of the quarter was $1,254.1 million.

Guidance

Management remains impressed with its quarterly performance and believes that it is well positioned to achieve its targets.

Taking cue from the strong quarter, management raised its guidance for fiscal 2014, yet again. It now anticipates revenues of about $3.03 billion, reflecting 30% growth over last year. Earlier, the company had projected net revenue in the band of $2.98–$3.0 billion, up 28% to 29% from the prior year.

Under Armour also raised its operating income forecast for the year to come to approximately $348 million, up 31% from the 2013 level, while it had previously guided operating income between $343 million and $345 million, representing 29% to 30% year-over-year growth.

Other Stocks to Consider

Other stocks worth considering in the retail sector include Hanesbrands Inc. (HBI) sporting a Zacks Rank #1 (Strong Buy), and Gildan Activewear Inc. (GIL) and Lululemon Athletica Inc. (LULU) both carrying a Zacks Rank #2.

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