Posted: 8:02 pm Thu, January 28, 2010
By Liz Farmer
Daily Record Business Writer
Baltimore-based Under Armour Inc. beat analysts’ estimates and nearly doubled its fourth-quarter profit in 2009 — an increase helped by gains in its apparel business during the holiday season, the company said Thursday.
The results prompted the athletic apparel maker to raise its 2010 projections by 10 to 12 percent to between $945 million and $960 million.
The company’s fourth-quarter net income increased by 83 percent to $15.2 million, or 30 cents per share, compared with $8.3 million, or 17 cents per share, a year earlier. Under Armour also reported a 22.5 percent rise in its profit for the year, netting $46.7 million compared with $36.2 million in 2008.
Under Armour also beat its own estimates and reported an 18.1 percent increase in net revenue for the year, to $856.4 million from $725.2 million in 2008. The company previously projected revenue of $830 million to $835 million.
The company reported double-digit gains in men’s, women’s and youth apparel, and a 60 percent increase in footwear sales, mainly due to the launch of its running shoe last year.
The growth is reminiscent of the company’s pre-recession era numbers, said Andrew Bekoff, an analyst for Meyers Associates in New York.
“They’re back to where they were in 2007,” he said. “They’re back into that mindset. But I think he question going forward is can they continue to execute that same way or is the consumer going to go back and be more discretionary?”
Despite that growth, it’s not full steam ahead on all fronts for Under Armour in 2010. The company said Thursday it was dialing down its previously planned growth in its shoe lines to focus on product development, and would not be launching a basketball shoe in 2010. Under Armour does have plans this year for pro athlete Brandon Jennings and about 30 high school and college teams, including the University of Maryland, College Park, to test prototypes of its basketball shoe.
Instead, Under Armour is focusing on apparel and growing its direct-to-consumer sales.
“U.S. wholesale apparel sales will continue to be a point of strength in 2010,” David McCreight, the company’s president, said to investors in a conference call Thursday. “The focus for footwear is to continue to excel in our cleated shoe while taking a conservative approach to running and other footwear in 2010.”
Under Armour expects its footwear sales to be down this year as a result.
Bekoff expressed doubt that Under Armour would ever be able to compete at Nike’s level on the footwear front. Under Armour entered the footwear market in 2006 with the launch of its football cleat, and since then has developed a baseball cleat, cross trainers and running shoes. Under Armour’s footwear sales totaled $84.8 million last year, compared with Nike’s $4.1 billion in fiscal 2009, which ended May 31.
In 2009, footwear made up less than 15 percent of Under Armour’s total sales, and Bekoff noted that outside of the mid-Atlantic, that part of the brand has yet to gain momentum.
“Apparel is still really the nuts and bolts of the company,” he said. “To me, the consumer here is driving the car. And there’s a lot of uncertainty going forward.”
Meanwhile, Under Armour is investing in wholesale apparel by planning to open 15 factory house stores in 2010, bringing the company’s total to about 50 stores, McCreight said.
“This will help us approach $1 billion in sales,” he said.
CEO Kevin Plank detailed developments planned for the company’s apparel line, including a padded compression short to be released this spring, Under Armour outfitting the U.S. Olympic bobsled and free skate teams, and the company’s plans to outfit the Boston College athletic program this July.
“It is about protecting our foundation and staying close to our athletes,” Plank said. “We want to focus on maintaining our core while bringing new consumers into our brand.”
Under Armour’s shares fell $1.66, or nearly 6 percent, Thursday to close at $26.26, although Bekoff said the drop was more a reflection of the overall stock market. The Dow Jones industrial average dropped more than 115 points Thursday.