Footwear Tops Under Armour Agenda

Footwear, women’s and retail will be the three priorities at Under Armour Inc. in 2013.

And all will go hand in hand as the presentation of footwear will now be elevated in all stores, which also will carry as much women’s apparel as men’s.

Kevin Plank, chairman and CEO of the Baltimore-based firm, told analysts on a conference call Thursday, “What will be neat about the stores is that footwear will actually be in the center of the store, so it will be a real primary focus when the consumer walks in. [Instead of] people walking in and saying, ‘Oh my gosh, you sell shoes,’ [they will now say], ‘Wow, this is a footwear brand.’”

Shoes made up 9 percent of the firm’s total revenue in the fourth quarter ended Dec. 31. Plank explained that Under Armour has so far achieved meaningful market share in footwear in just one category: cleated. But opportunities exist for the brand to grow beyond the nearly $250 million in revenue it reached in 2012, by expanding in categories such as running and basketball.

Plank also addressed the imminent departure of Gene McCarthy, SVP of footwear at the firm.

“Under our new leadership with Kip Fulks — my original partner and the person who has overseen all of our product development and innovation for the past two years — we are building [an Under Armour] footwear culture that will ensure we are positioned to fight the market leadership in every athletic footwear category. Kip’s primary focus in footwear will be to lead and to continue to bring new talent into the team,” said Plank.

“Footwear [has] reported to Kip for the past two years, in addition to innovation. So he understands the things that are in the pipeline and the way that we’re going to pull the trigger there,” he added.

According to Plank, the running product pipeline is full, with Spine Venom, Charge 2 and Toxic 6 launching throughout 2013.

Analysts were upbeat on, among other things, Under Armour’s inventory management heading into this year.

Camilo Lyon, analyst at Canaccord Genuity, called the firm’s fourth-quarter results solid in a tough environment.

“Apparel growth of 25 percent, coupled with footwear growth of 43 percent, demonstrates that demand for the brand has not ebbed, despite another challenged winter season in which cold weather came after the Christmas season,” he said.

UBS analyst Michael Binetti, said, “We expect ongoing solid trends from the core apparel business. That said, their challenge in 2013 will be reinvigorating confidence in the ‘beyond the core’ multi-faceted growth story investors heard at the 2011 analyst day in the wake of several key management departures (in supply chain, marketing, footwear, accessories) — and little new news on international expansion.”

Footwear was the fastest-growing category at Under Armour in the fourth quarter, when revenue grew 25 percent to $506 million, and net income increased 52 percent to 47 cents a share, beating the Street’s expected income of 46 cents on revenue of $497.7 million.

For 2013, Under Armour expects total sales to come in between $2.20 billion and $2.22 billion, representing 20 percent to 21 percent growth over 2012.

Under Armour’s shares closed 5.7 percent higher Thursday, at $50.87.

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