Under Armour Women's & Youth Apparel unit perk up

30 Jul '08

6 min read

Footwear net revenues represented 29% of total net revenues in the second quarter of 2008 compared to 17% in the same period of the prior year.

Selling, general and administrative expenses were 43.2% of net revenues in the second quarter of 2008 compared to 42.2% in the prior year.

Marketing expense for the second quarter of 2008 was 14.4% of net revenues compared to 13.5% in the prior year's period. The Company still expects to invest in marketing at the high-end of the range of 12% to 13% of net revenues for the full year.

Balance Sheet Highlights:
Inventory totaled $183.9 million at June 30, 2008, compared to $166.1 million at December 31, 2007 and $128.8 million at June 30, 2007.

As the Company had anticipated, the inventory growth rate in the second quarter of 2008 marked a deceleration from the inventory growth reported for the first quarter. Inventory in the second quarter of 2008 increased 42.8% year-over-year.

Based on its inventory management strategy and supply chain initiatives, the Company continues to expect inventory to grow in-line with net revenues by the end of the third quarter and inventory to grow at a rate below net revenues by the end of the year.

Cash and cash equivalents were $13.3 million at June 30, 2008 compared to $40.6 million at December 31, 2007 and $25.7 million at June 30, 2007. The Company had $5.0 million in borrowings outstanding under its $100 million revolving credit facility at June 30, 2008.

Outlook for 2008:
As previously stated, the Company is targeting a 25% compounded annual growth rate in net revenues from 2007 to 2010.

For 2008, the Company continues to expect annual net revenues in the range of $765 million to $775 million, an increase of 26% to 28% over 2007.

However, based on the results in the second quarter, the Company is raising its 2008 income from operations outlook to $104.5 million to $105.5 million, an increase of 21% to 22% over 2007. The Company had previously estimated 2008 income from operations to be in the range of $103.5 million to $104.5 million.

With second half footwear shipments predominantly in the fourth quarter and continued strong growth anticipated in the Direct-to-Consumer channel, which is also most pronounced in the fourth quarter, net revenues for the third and fourth quarters of 2008 are expected to be relatively similar.

Coupled with the timing of planned investments in the second half, fourth quarter earnings are expected to be the highest of the year as compared to 2007 when earnings peaked in the third quarter.

Mr. Plank concluded, "Under Armour is a growth company, and we remain excited about the enormous opportunities ahead. We expanded the breadth of our leadership team with the addition of David McCreight as President, successfully launched into non-cleated footwear, announced our entry into the Running Footwear business, and are seeing growth in our Women's and Youth apparel businesses outpace Men's with all categories on-track to hit full year projections. We are building a platform business with multiple growth levers and are setting the stage for continued growth in 2009 and beyond."

Under Armour Inc

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