Under Armor Q4 Earnings: Yet Another Solid Quarter To Complete The Year On A High Note

Under Armour (NYSE:UA) posted yet another strong quarter this time around. The company managed to beat the revenue and earnings estimates forecasted by analysts. The company’s footwear business really shined through this quarter, posting a 95% increase in revenues. The segment grew by about 57% overall this financial year. Furthermore, the company expanded its international reach which now accounts for almost 11% of all the revenues. UA expects this trend to continue and for business internationally to grow to 18% by 2018. However, the company posted weak margins in the quarter, mostly offset by a skewed product mix, negative foreign exchange rates and higher inventory liquidations. ^[1]

Key Financial Highlights:

• The company recorded revenues of $3.96 billion for the year (the guidance was set at $3.91 billion), posting an increase of almost 28%. For the quarter, the revenues were recorded at $1.17 billion. This marks an  increase of about 31%.
• The full year diluted earnings were up 11%, coming in at $1.05 per share. For the quarter, the EPS increased to a significant $0.48 from $0.40 in the previous year.
• Inventories for the quarter increased 46% (year over year) to reach $783 million.

This is the twenty-third straight quarter to consecutively record a growth of more than 20%. All said and done, Under Armor is going places and one has to recognize the immense potential the company possesses.

The company’s stock price climbed by almost 20% following the earnings call, displaying great confidence in the market.

Growth Across all Segments, Driven Primarily by Footwear:

The company witnessed growth across all its segments, with footwear leading the charge. As mentioned previously, Under Armor’s footwear segment saw a 95% increase in revenues (to $167 million) when compared to the same period last year. What is primarily driving growth in this segment is the company’s Stephen Curry shoe line that was launched about a year ago. In addition, the company has also added more variants to their running footwear line. This move has also helped propel revenues in the recent quarter.

The athletic apparel company managed to increase their business above $100 at retail by 1000% in the past year. This was principally due to heavy expansion in the design and development teams. Premium footwear has always been a primary driver for top line acceleration and the company hopes to push the limit even further. The management hopes to someday build a $1 billion footwear brand (a segment that currently accounts for almost 17% of the business). In all likeliness, this looks like an achievable target.

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Great Potential Seen in the International Segment:

The company’s international segment grew by a whopping 70% in the quarter (and 69% over the year). Currently, the business generated from this segment is close to 500 million with operations in more than 60 countries. As mentioned previously, international operations account for close to 11% of the revenues, with the company hoping to push this number to 18% by 2018.

In Europe, the company has increased its focus on two key markets — Germany and England. This continues to propel momentum in both these markets. Additionally, Under Armor has increased the number of in-country websites it operates in the region to 9 in the year. This has helped increase the reach and awareness of the products the company has to offer.

In Asia-Pacific, the company continues to witness high demand. For instance, the greater China and Southeast Asian markets saw triple digits growth figures in the quarter, driven primarily by the success and expansion of brand house stores in the region. In Latin America, which is a still nascent market for the company, business is beginning gathering momentum as the management increases geographic expansions to other countries (most notably Chile). Such expansions have helped offset the negative impacts from the adverse macro economic challenges currently plaguing Brazilian market.

At the moment, it seems like things are going very well for the company. With the introduction of new products and the legacy of their signature products, revenues are bound to increase in the future. Furthermore, the company is all game to increase its international reach and hopes to create a global brand image that is synonymous with the likes of Nike and Adidas. Given the current momentum, it seems highly plausible that the company has the potential to reach this goal. Only time will reveal what actually happens.

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1. Under Armor Q4 2015 Earnings Call Transcript, www.seekingalpha.com [↩]