Under Armour probably became the third-largest general sports apparel and footwear brand, after another whopping sales increase of 28.5 percent to $3,963.3 million last year. New Balance reported sales of $3.3 billion for 2014 while Puma projected a sales increase at a mid-single-digit rate in constant currencies in 2015, from sales of €2,972 million in 2014.
Under Armour ended the year with another buoyant quarter. Its sales were up by 30.8 percent to $1,170.7 million for the last three months of the year, amounting to an increase of 33 percent in constant currencies, while operating and net income both advanced by 21 percent.
The group's sales outside of North America expanded by 69.8 percent to $138.7 million, which was an increase of 85 percent in constant currencies and amounted to 12 percent of the brand's turnover for the quarter.
The entire group's apparel sales were on the rise, up by 22 percent to $865 million, driven by training, running, golf and basketball. Footwear sales advanced by 95 percent to $167 million, as Under Armour widened its range and cashed in on the basketball footwear endorsed by Stephen Curry. An expanded range of bags lifted sales of accessories by 23 percent to $97 million.
Under Armour's own retail sales inflated by 25 percent and amounted to about 36 percent of the brand's turnover for the quarter. Kevin Plank, the company's chief executive, pointed out in a conference call that mobile connections have grown to almost 50 percent of the traffic on Under Armour's website in the U.S. and made up 23 percent of online sales in the quarter.
The group's gross margin dipped by 1.9 percentage points to 48.0 percent for the quarter. The most important factor behind this was the sharp increase in Under Armour's sales of footwear and in international markets. The less favorable product mix accounted for a decline of 0.9 percentage points in the gross margin. Another 0.8 percentage point decline was blamed on the strength of the dollar, while higher liquidations shaved 0.3 percentage points off the gross margin. Operating income jumped by 21 percent to $178 million and the company ended the quarter with net profit of $105.6 million, which was another increase of 21 percent.
The group's turnover for the full year was slightly above its projection of $3.91 billion. Footwear sales advanced by 57.3 percent to $677.7 million, as the company expanded its offering in running and basketball. But just as remarkably, it achieved another increase of 22.2 percent to $2,801.1 million for its apparel sales, driven by golf, running and team sports. Sales of accessories jumped by 26 percent to $346.9 million.
Under Armour's own retail sales amounted to 30 percent of its turnover for the year, after an increase of 27 percent. The group ended the year with 25 global websites and nearly 400 Under Armour stores, either owned by the company or retail partners.
International sales soared by 69 percent in dollars and by 84 percent in constant currencies, to make up 11 percent of the group's turnover last year. At its investor day, Under Armour set a target for international sales to increase to 18 percent of the company's turnover by 2018, out of targeted sales of $7.5 billion, which would amount to about $1.35 billion.
The brand's sales increases in Europe have been driven by heightened focus on the U.K. and Germany, and it launched nine new country websites in Europe last year. Under Armour also boasted triple digit sales growth in Greater China and Southeast Asia, led by the expansion of its stores. While Brazil remains under pressure, Under Armour is also continuing to expand in other countries in Latin America, most recently moving into Chile.
The U.S. company split out sales for its digital fitness activities, amounting to €53.4 million for the year. Under Armour says it ended 2015 with nearly 160 million unique registered users across its digital platform. Earlier this year it launched an updated version of UA Record, its digital dashboard app for health and fitness, along with the Under Armour Health Box, which is a set of connected fitness products, and a smart shoe. The investments provide Under Armour with a huge set of data regarding the health and fitness habits of its customers.
The group's gross margin was down by 0.9 percentage points to 48.1 percent for the year, including a negative impact of 0.7 percentage points caused by the strength of the dollar. Plank emphasized that the margin for footwear was structurally lower than for apparel, but that the brand was pursuing expansion in premium products and through a segmented distribution strategy.
Plank said the company will deliver more iterations of its star-endorsed footwear across high-end price points and distribution. Under Armour intends to double its offerings priced above $100 in the running category, including the launch of its first smart shoe and the Speedform Slingshot, made with a 3D knitting process. The company has more than doubled the size of its footwear team to nearly 230 people, including the addition of a women's team.
Under Armour's operating income rose by 15 percent to $408.5 million last year, almost exactly aligned with projections of $408 million. Two of Under Armour's acquisitions in connected fitness were finalized in the first quarter, generating costs of $23 million in operating losses, one-time transactions costs, and non-cash amortization charges of the intangible assets generated from the acquisitions.
The company ended the year with net income of $232.6 million, up by 11.8 percent. The group's inventories inflated by 46 percent to $783 million at the end of the year and debt soared to $699 million, up from $284 million at the end of the previous year, chiefly due to the acquisitions in connected fitness.
The group predicts another sales jump of about 25 percent to $4.95 billion for this year, starting with an increase in the high twenties for the first quarter. Operating income is projected to increase by about 23 percent to $503 million. The forecasts are aligned with the financial targets set by the group at its investor day.
