Under Armour sales soar, shares fall
Revenue up 25%, but market expected more; profit is pinched by acquisitions
Under Armour shares fell nearly 5 percent Tuesday after the company reported that sales rose 25 percent in the first quarter when the market appeared to expect more.
The Baltimore-based sports apparel maker’s stock fell $4.34 a share to $83.52 in New York Stock Exchange trading.
“This stock trades on [revenue] growth,” which had been exceeding 30 percent, wrote UBS analyst Michael Binetti in a report Tuesday. “Even though 25.5 percent revenue growth ... remains impressive, we believe the recent stock run assumed that ongoing 30 percent plus revenue growth would continue.”
Under Armour reported that sales rose to $805 million in the January-to-March period, up from $642 million in the first quarter of 2014 as the brand made strides to expand internationally and build its footwear business.
The company’s profit was pinched by expenses related to its acquisitions of two fitness technology companies during the quarter, slipping 13 percent to $12 million, or a nickel per share, in the recent quarter, down from $14 million, or 6 cents per share, a year earlier.
The company also revised its outlook for 2015, projecting a 23 percent increase in revenue to $3.78 billion, but that too fell short of expectations and, Binetti noted, those expectations could weigh on Under Armour shares in the near term.
Still, Under Armour’s stock price is up 23 percent this year, outpacing many in the apparel and footwear industry, and the revenue growth represented yet another milestone for the company.
The last time the company posted quarterly sales growth of less than 20 percent was five years ago, or “back before Jordan Spieth had his driver’s license,” said Under Armour CEO Kevin Plank during a conference call Tuesday with analysts.
The 21-year-old Spieth’s recent win at the Masters golf tournament was the latest in a series of notable accomplishments this year by Under Armour athletes, including New England Patriots quarterback Tom Brady, Golden State Warriors basketball star Stephen Curry and downhill skier Lindsey Vonn, all of whomcontribute to sales growth as they represent the brand, Plank said.
“This represents five years of consistently exceeding the demands of our athletes and just as importantly, anticipating what those demands will be next,” Plank said. “It’s important to recognize that we’re just getting started.”
In the first quarter, international sales jumped 74 percent and accounted for the fastest-growing part of the business as the brand expanded into the Middle East and Brazil and opened dozens of stores in China. International sales now account for 12 percent of overall revenue, marking the first time in company history that sales outside North America surpassed 10 percent of overall sales, said Brad Dickerson, the company’s chief financial officer and chief operating officer.
Under Armour continued to extend its reach in digital fitness, finalizing its acquisitions of MyFitnessPal and Endomondo for $560 million. Through its Under Armour Record umbrella, which includes the MapMyFitness websites, the company added more than 10 million users since February to what it calls the world’s largest digital health and fitness community of 130 million users.
The footwear category grew to 20 percent of total sales, jumping 41 percent to $161 million. The brand saw increased de- mand as it offered more selections in Speedform running shoe styles and launched the new Curry One basketball shoe, the athlete’s signature sneaker.
“Footwear seems poised to be a bigger contributor going forward,” Binetti said in his report, citing Curry’s marketing impact.
Under Armour is on track to reach $10 billion in sales over the next five years, Sterne Agee analyst Sam Poser said in a Tuesday report.
“We would use today’s sell-off as an opportunity to add to or start positions,” said Poser, adding that he expects growth to be driven by women’s and youth apparel, footwear, sales through Under Armour’s stores and website, and international expansion.
Under Armour opened its largest ever Brand House store on Chicago’s Magnificent Mile and the company’s first stores in Brazil and the Middle East this year, helping to propel the 74 percent growth in international sales. The company’s sales of women’s apparel are expected to someday equal or surpass its core men’s business.
Though the trend of athletic apparel as fashion is likely to continue, Plank said, “we’re trying to be more relevant than just in the gym.”