Baltimore, MD (October 28, 2008) - Under Armour, Inc. (NYSE: UA) today announced financial results for the third quarter ended September 30, 2008.
Net revenues increased 24.1% in the third quarter of 2008 to $231.9 million compared with net revenues of $186.9 million in the third quarter of 2007. Third quarter net income increased 28.1% to $25.7 million compared with $20.0 million in the same period of 2007. Diluted earnings per share for the third quarter of 2008 was $0.51 on weighted average common shares outstanding of 49.9 million compared with $0.40 per share on weighted average common shares outstanding of 50.1 million in the third quarter of the prior year.
"Delivering 24% top line growth in the third quarter is a testament to our growth strategy and our connection with the athletes of this generation," stated Kevin Plank, Chairman and CEO of Under Armour, Inc. "By maintaining our focus on delivering the most compelling technical products to our consumer, we not only strengthen our connection with them but build the foundation to enter new markets."
Apparel net revenues for the third quarter rose 19.0% to $201.1 million compared with $169.0 million in the same period of the prior year. The Women's business achieved the strongest percentage rate of growth during the quarter, increasing 27.5% to $50.3 million. Footwear revenues increased to $13.1 million from $2.2 million in the third quarter of 2007, primarily driven by Performance Training Footwear, which launched during the second quarter of 2008.
Gross margin for the third quarter of 2008 was 51.0% compared with 50.6% in the prior year's quarter primarily due to increased reserves and allowances in the third quarter of 2007 related to discontinued cleated footwear styles. Selling, general and administrative expenses were 31.0% of net revenues in the third quarter of 2008 compared with 32.5% in the prior year. Marketing expense for the third quarter of 2008 was 10.7% of net revenues versus 11.5% 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.
For the first nine months of 2008, net revenues increased 26.5% to $546.0 million compared with $431.7 million in the prior year. Net income for the first nine months of 2008 was $29.9 million compared with $35.7 million in the same period of 2007. Diluted earnings per share for the first nine months of 2008 was $0.60 on weighted average common shares outstanding of 49.9 million compared with $0.71 per share on weighted average common shares outstanding of 49.9 million in the prior year. Based on the seasonality of net revenues and the timing of marketing and other investments, the Company had previously indicated that earnings would be more heavily weighted to the back half of 2008 relative to 2007.
Mr. Plank concluded, "Under Armour is a growth company, and our growth is driven by our demonstrated ability to successfully leverage our positioning as a premium performance brand. The strength of our team and our business model will allow us to grow and invest in the future. We will continue to plan our investments prudently and focus our resources on driving value for the company and our shareholders."
Balance Sheet Highlights
Inventory totaled $163.6 million at September 30, 2008 compared with $151.8 million at September 30, 2007, an increase of 7.8% over the prior year and a decrease from the inventory balance reported at the end of the second quarter. Based on its current sales forecast, inventory management strategy and supply chain initiatives, the Company continues to expect inventory to grow at a rate below net revenues by the end of the year. Cash, net of debt, was $2.6 million at September 30, 2008 compared with net debt of $0.1 million at September 30, 2007. The Company had $15.0 million in borrowings outstanding under its $100 million revolving credit facility at September 30, 2008.
"Inventory control has been a major focus for the organization," stated Wayne Marino, Chief Operating Officer. "We set specific, measurable goals for inventory and aligned the leadership of the company against those goals. Discipline and process improvement have led to the team's successful delivery on those expectations. By year end, we still anticipate inventory growth to remain below the rate of revenue growth, and for 2009, we are striving for improved inventory efficiency. Our focus remains on building the infrastructure of the company to support the vision of the Brand."
Outlook for 2008
While the Company has delivered strong results for the first nine months of the year, the Company is revising its 2008 outlook based on the current economic environment. The Company is revising its 2008 net revenues outlook to $750 million to $765 million, an increase of 24% to 26% over 2007. Additionally, the Company is revising its 2008 income from operations outlook to $97.5 million to $104.5 million, an increase of 13% to 21% over 2007. The Company had previously anticipated 2008 net revenues in the range of $765 million to $775 million and 2008 income from operations in the range of $104.5 million to $105.5 million.
Conference Call and Webcast
Under Armour will host a conference call and webcast to discuss its financial results today, October 28th, at 8:30 a.m. ET. This call will be webcast live at investor.underarmour.com and will be archived and available for replay approximately three hours after the live event. Additional supporting materials related to the call will also be available at http://investor.underarmour.com. The Company's financial results are also available online at http://investor.underarmour.com/results.cfm.
About Under Armour, Inc.
Under Armour® (NYSE: UA) is a leading developer, marketer, and distributor of branded performance apparel, footwear, and accessories. The brand's moisture-wicking synthetic fabrications are engineered in many different designs and styles for wear in nearly every climate to provide a performance alternative to traditional natural fiber products. The Company's products are sold worldwide and worn by athletes at all levels, from youth to professional, on playing fields around the globe. The Under Armour global headquarters is in Baltimore, Maryland, with European headquarters in Amsterdam's Olympic Stadium, and additional offices in Denver, Hong Kong, Toronto, and Guangzhou, China. For further information, please visit the Company's website at www.underarmour.com.
Forward Looking Statements
Some of the statements contained in this press release constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts, such as statements regarding our future financial condition or results of operations, our prospects and strategies for future growth, the development and introduction of new products, and the implementation of our marketing and branding strategies. In many cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "outlook," "potential" or the negative of these terms or other comparable terminology. The forward-looking statements contained in this press release reflect our current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. Readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to: our ability to forecast and manage our growth effectively; our ability to develop and launch effectively new or updated products; our ability to accurately forecast consumer demand for our products; changes in general economic or market conditions that could affect consumer spending and the financial health of our retail customers; our ability to obtain the financing required to grow our business, particularly when credit and capital markets are unstable; increased competition causing us to reduce the prices of our products or to increase significantly our marketing efforts in order to avoid losing market share; changes in consumer preferences or the reduction in demand for performance apparel and other products; reduced demand for sporting goods and apparel generally; failure of our suppliers or manufacturers to produce or deliver our products in a timely or cost-effective manner; our ability to accurately anticipate and respond to seasonal or quarterly fluctuations in our operating results; our ability to effectively market and maintain a positive brand image; the availability, integration and effective operation of management information systems and other technology; our ability to attract and maintain the services of our senior management and key employees; and our ability to maintain effective internal controls. The forward-looking statements contained in this press release reflect our views and assumptions only as of the date of this press release. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.