Largely exceeding expectations, Under Armour announced a 34.1 percent jump in its revenues to $609.7 million for the second quarter, leading the management to forecast an increase of between 28 and 29 percent for the full year to a range of $2.98 billion to $3.0 billion.
Operating income is projected to grow by between 29 and 30 percent for the year to $343-245 million, after rising in the latest quarter by only 7.4 percent to $34.7 million, in spite of an improvement in the gross margin of 0.9 percentage points to 49.2 percent. One factor was an increase in sponsorship costs, which led marketing expenses to reach 11.6 percent of sales, up from 10.7 percent in the year-ago period.
The marketing push is going on unabated with the launch this week of the company's first global campaign directed at women, revolving around Misty Copeland, the main dancer in the American Ballet Theater. The women's segment has already risen to an annualized turnover of more than $500 million for the company, which started up by targeting the American male customer.
The effort is probably set to continue as the company is planning to join the conversation in the global football sector, with a goal to become the world leader in 12 to 20 years' time. This statement of intentions, made during a conference call with financial analysts, caused a lot of perplexity.
Under Armour is also planning to support its strong international momentum with store openings. Brand House stores opened recently in Panama City, the Philippines and Singapore, and the company says that 80 percent of its new square footage will be located outside the U.S. this year. Under Armour is also accelerating the pace of new store openings through its partners in Asia.
Aside from licenses, the company's sales outside North America represented only 8 percent of total revenues in the second quarter, but at $51.6 million, they were up by 101 percent as compared to the same period a year ago. Strong results in Europe were lifted by rising brand awareness and an ongoing focus on three key markets: the U.K., Germany and France. The international drive was partly supported by the takeover of the distribution in Mexico and the start-up of a subsidiary in Brazil.
Income from licenses grew by 75 percent to $20.2 million in the quarter. Direct-to-consumer revenues went up by 38 percent and came to represent about 31 percent of the total turnover.
Apparel remained the key product category for the brand with sales of $420.0 million, up 35.4 percent year-on-year, but footwear got traction from the company's new running products, rising by 34.2 percent to $109.5 million. Sales of accessories went up by 17.5 percent to $59.9 million.
Connected fitness is described as another area of expansion at Under Armour. Its MapMyFitness platform has been getting about one million new registered users every month. Its database is expected to grow by year-end to more than 30 million people, about one-third of whom will be located outside the U.S.
Net earnings were essentially flat at $17.69 million in the quarter, compared with $17.57 million a year ago.
