Baltimore, MD (October 23, 2014) - Under Armour, Inc. (NYSE: UA) today announced financial results for the third quarter ended September 30, 2014. Net revenues increased 30% in the third quarter of 2014 to $938 million compared with net revenues of $723 million in the prior year's period. Net income increased 22% in the third quarter of 2014 to $89 million compared with $73 million in the prior year's period. Diluted earnings per share for the third quarter of 2014 were $0.41 compared with $0.34 per share in the prior year's period.
Third quarter apparel net revenues increased 26% to $705 million compared with $561 million in the same period of the prior year, driven primarily by expanded offerings and platform innovations across training, golf, and outdoor. Third quarter footwear net revenues increased 50% to $122 million from $81 million in the prior year's period, led by new introductions in running and basketball. Third quarter accessories net revenues increased 32% to $85 million from $64 million in the prior year's period, primarily driven by expanded offerings in headwear, bags, and gloves. Direct-to-Consumer net revenues, which represented 26% of total net revenues for the third quarter, grew 35% year-over-year. International net revenues, which represented 9% of total net revenues for the third quarter, grew 94% year-over-year.
Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, "Our strong third quarter results demonstrate the power of the UA brand. The momentum and growing confidence we outlined last quarter in Footwear and International were on full display in the third quarter with growth rates accelerating to 50% and 94%, respectively. Our Direct-to-Consumer business continues to drive our vision to Empower Athletes Everywhere with the debut of local E-Commerce sites in the United Kingdom, Germany, and France, as well as optimizing all global sites for mobile to stay ahead of where our consumers are going. And we were particularly excited about our I WILL WHAT I WANT™ global women's campaign, featuring Misty Copeland and Gisele Bündchen, which ignited a powerful new dialogue with our female consumer as we begin to bridge the gap between female athletes and athletic females."
Gross margin for the third quarter of 2014 was 49.6% compared with 48.4% in the prior year's quarter, primarily driven by higher import duties in the prior year's period and favorable year-over-year sales mix. Selling, general and administrative expenses as a percentage of net revenues were 34.0% in the third quarter of 2014 compared with 31.7% in the prior year's period, reflecting broad-based investments to support global growth initiatives as well as higher incentive compensation expenses. Third quarter operating income increased 21% to $146 million compared with $121 million in the prior year's period.
Balance Sheet Highlights
Cash and cash equivalents increased 34% to $249 million at September 30, 2014 compared with $186 million at September 30, 2013. Long-term debt including current maturities increased to $192 million at September 30, 2014 compared with $54 million at September 30, 2013. Inventory at September 30, 2014 increased 28% to $637 million compared with $497 million at September 30, 2013.
Updated 2014 Outlook
The Company had previously anticipated 2014 net revenues in the range of $2.98 billion to $3.0 billion, representing growth of 28% to 29% over 2013, and 2014 operating income in the range of $343 million to $345 million, representing growth of 29% to 30% over 2013. Based on current visibility, the Company expects 2014 net revenues of approximately $3.03 billion, representing growth of 30% over 2013, and 2014 operating income of approximately $348 million, representing growth of 31% over 2013. The Company anticipates an effective tax rate of approximately 40.0% for the full year, compared to 37.8% for 2013, and fully diluted weighted average shares outstanding of approximately 218 million for 2014.
Mr. Plank concluded, "Our plans of crossing $3 billion in net revenues and achieving 30% growth this year represent significant milestones for the Brand, but we believe we are just getting started. We are delivering consistent top line results while making the right investments to support both the near- and long-term opportunities of the Brand. This includes investments to build world-class design and innovation capabilities for all of our products, accelerate our international footprint, and expand our 30 million users under our Connected Fitness platform. We believe this balanced approach will continue to drive our global ambitions and long-term value for our shareholders. We are proud of what we have built and continue to see ourselves as a much larger brand than the $3 billion in revenues we are projecting for 2014."
Conference Call and Webcast
The Company will provide additional commentary regarding its third quarter results as well as its updated 2014 outlook during its earnings conference call today, October 23, at 8:30 a.m. ET. The call will be webcast live at http://investor.underarmour.com/events.cfm 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), the originator of performance footwear, apparel and accessories, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. Under Armour's wholly owned subsidiary, MapMyFitness, powers one of the world's largest Connected Fitness communities. The Under Armour global headquarters is in Baltimore, Maryland. For further information, please visit the Company's website at www.uabiz.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: changes in general economic or market conditions that could affect consumer spending and the financial health of our retail customers; our ability to effectively manage our growth and a more complex global business; our ability to effectively develop and launch new, innovative and updated products; our ability to accurately forecast consumer demand for our products and manage our inventory in response to changing demands; increased competition causing us to lose market share or reduce the prices of our products or to increase significantly our marketing efforts; fluctuations in the costs of our products; loss of key suppliers or manufacturers or failure of our suppliers or manufacturers to produce or deliver our products in a timely or cost-effective manner; our ability to further expand our business globally and to drive brand awareness and consumer acceptance of our products in other countries; 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; our ability to comply with trade and other regulations; the availability, integration and effective operation of management information systems and other technology, as well as any potential interruption or security lapse in such systems or technology; our ability to effectively integrate new businesses and investments into our company; our potential exposure to litigation and other proceedings; and our ability to attract and retain the services of our senior management and key employees. 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.