Q4, Full Year Solid for Under Armour

Amid reporting positive fourth-quarter and full-year earnings, Under Armour Inc. reiterated last week its commitment to expanding its footwear business, but said it still does not expect the category to grow this year.

Rather, the firm said it plans to reinvest in footwear in 2010 and said that 2011 could be the year for a sales resurgence. Kevin Plank, chairman and CEO, said on a post-earnings conference call that this year Under Armour will “strengthen the categories that we’ve already entered and establish ourselves, particularly cleats. We expect to take market share in both football and baseball cleats in 2010 and beyond.”

The firm is also repositioning its training and running footwear category “so that we are better organized to develop product that will move us down the path of being a multibillion-dollar global brand,” Plank said.

As a result, “We are planning footwear revenues to be down in 2010 with the most significant dollar impact occurring in the first and third quarters,” said CFO Brad Dickerson on the call.

Under Armour is also developing new footwear categories that it expects to impact business in 2011. “Being a great footwear company is not just about making a big splash with large product, and we have no major footwear launches planned for 2010. However, we are developing our basketball footwear and positioning [it] for a future launch,” Plank said.

The firm said capital expenditures in 2010 are seen at $35 million to $40 million, which would compare with $25 million in 2009.

Last Thursday, Under Armour Inc. posted a significant uptick in fourth-quarter profits on a 24 percent increase in sales, both easily surpassing Wall Street’s projections. The Baltimore-based firm said net income nearly doubled to $15.2 million, or 30 cents a share, versus $8.3 million, or 17 cents, the prior year. Net revenues rose to $222.2 million from $179.3 million.

Analysts were expecting a profit of 25 cents on revenues of $200.6 million.

By category, footwear revenues in the quarter declined 5 percent to $8.8 million., while apparel sales rose 26 percent to $192.1 million.

For the year, Under Armour posted a profit of $46.8 million, or 92 cents a diluted share, compared with $38.2 million, or 76 cents, the year earlier. Revenues rose 18 percent to $856.4 million, and footwear revenues in the year popped 61 percent to $136.2 million.

The firm said footwear and the direct-to-consumer business “represented two of the largest components” of its revenue growth last year. In 2010, revenues are expected to be driven by wholesale apparel and its direct-to-consumer channel.

The company upwardly revised its 2010 revenue outlook to an increase of 10 percent to 12 percent, or $945 million to $960 million, versus a prior expectation for a high single digit to low double-digit increase.

Full-year earnings are seen rising 10 percent to 12 percent, too.

Analysts at press time were expecting EPS of $1.18 on revenues of $915.8 million.

“We are fully capable of achieving our 2010 targets for top- and bottom-line growth while taking a more conservative approach to footwear revenue. We believe strongly that coming out of 2010 with both clean inventories and a markedly improved footwear product line positions us well for growing footwear starting in 2011,” said David McCreight, president of Under Armour, on the call.

The company expects to open 15 factory stores in 2010, which would bring it to a total of 50 stores by year end.

Shares of Under Armour fell in trading on Thursday among a broader market sell-off. The stock closed down about 6 percent at $26.25.

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