Under Armour beats analysts’ sales, earnings estimates in third quarter

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Under Armour expects sales to top $3 billion this year, company officials said Thursday, as the brand announced a third-quarter profit jump of 22 percent.

The Baltimore-based sports apparel maker raised its annual sales forecast to $3.03 billion, a 30 percent increase over 2013. That growth, the company said, is propelling what began as a men’s athletic apparel brand into one that will be known equally for selling shoes and women’s clothing around the globe.

“This milestone just leaves us thinking about what’s coming and how to become a bigger and stronger brand,” Under Armour CEO and founder Kevin Plank said Thursday during a conference call with analysts.

Under Armour reported net income of $89 million, or 41 cents per share, up from $73 million, or 34 cents per share, for the July-to-September period. Wall Street analysts had estimated earnings of 40 cents a share.

The quarter’s sales also topped expectations, rising 30 percent to $938 million from $723 million a year earlier, the company said. Analysts called for $925.8 million in sales in the current third quarter.

“Overall, the quarter itself was another phenomenal quarter on virtually every front,” said Jason Moser, a senior analyst with Motley Fool One in Alexandria, Va.

Under Armour posted impressive growth in athletic footwear sales, international sales and sales through online and branded stores, while managing to maintain pricing levels on products, he said.

Apparel sales grew 26 percent to $705 million, driven mostly by new merchandise in the training, golf and outdoor categories. That gain came in below some analysts’ expectations, sending share prices down early in the day. The stock closed down $1.79 a share at $64.34 each, off about 2.6 percent.

Michael Binetti, an analyst who follows apparel, footwear and department stores for UBS Investment Bank, had expected to see a 30 percent gain.

Moser, though, contended such deceleration is to be expected because companies cannot sustain consistently explosive growth. As companies expand, he said, “the growth starts to slow down, but that doesn’t mean it’s not growing.”

To continue growing, Under Armour must ensure it can supply more merchandise while maintaining quality, he said.

Already, the broader product assortments that come with growth have presented challenges on the retail floor, an area targeted for improvement, said Brad Dickerson, Under Armour’s chief financial officer.

The company is working with wholesale partners, such as Sports Authority and Dick’s Sporting Goods, to fine tune displays, especially as it seeks to attract more women shoppers, he said.

“It’s how the product looks on the floor,” Dickerson said. “Is it jammed together so you can’t see the products? Is it a good balance of colors, tops to bottoms, appealing to the eye in quantity and color? We have some opportunity for improvement.”

Increasing its focus on sales to women, Under Armour this summer launched a global women’s campaign, “I Will What I Want,” with ads featuring ballet soloist Misty Copeland and supermodel Gisele Bundchen.

Plank called the campaign, designed to increase the $500 million women’s category from 30 percent to half the company’s business, “game changing” and said it has “struck a chord with women.” Under Armour videos of commercials featuring Copeland and Bundchen have drawn 13 million views and scores of first-time Under Armour customers, he said.

Sales of footwear, another key growth area for Under Armour, jumped 50 percent to $122 million in the third quarter, led by sales of new running and basketball shoes. The category, which has grown at a rate of more than 30 percent for the past few quarters, now accounts for about 13 percent of overall sales, or more than $400 million annually, and is projected to eventually rival or exceed the company’s core apparel business.

The brand will launch two new versions of its Speedform running shoe this spring, the Speedform Gemini, expected to sell for $130 and appeal to distance runners, and the Speedform Vent, a lighter-weight version that will sell for $100.

“We have taken the Speedform technology to reach a broader range of consumers and gain share on the shoe wall,” Plank said during Thursday’s call, describing the Gemini as “a product for the true hard-core runner… and one of most comfortable shoes I’ve ever put on my foot.”

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