Under Armour turns 20 in 2016; expects best year ever

A 31% increase in its store count and a host of digital initiatives helped Under Armour achieve stellar fourth quarter and full year results, with 2016 expectations calling for more of the same.



The record warm weather that hindered so many retailers fourth quarter performance, seemed to have no effect on Under Armour. The leading athletic apparel, footwear and accessories retailer and operator of 191 stores, said it revenues increased 31% to $1.17 billion during the period ended Dec. 31, 2015, compared to $895 during the comparable period the prior year. Excluding the effects of the strengthening dollar – Under Armour derives 12% of its revenues internationally – sales increased an even stronger 33%.



The company’s topline grew faster than the bottom line, as net income increased 21% to $106 million, or 48 cents a share, compared with $88 million, or 40 cents a share, in the prior year's period. Profitability was negatively affected by nearly 200 basis point decline in gross margin to 48% due to a combination of the strong dollar, increased markdowns and lower margin footwear accounting for a larger percentage of sales. To compensate, the company reduced selling, general and administrative expenses as a percentage of net revenues to 32.8% in the fourth quarter of 2015 compared with 33.6% the prior year.



Under Armour chairman and CEO Kevin Plank said the company’s core business remains incredibly strong and expansion of the breadth and depth of the brand is driving revenue growth.



“We delivered our 25th consecutive quarter of more than 20% net revenues growth in our largest product category of apparel. Moreover, we continued to diversify our product offering and geographic reach, driving significant market share gains in key strategic areas like basketball footwear, while better meeting the needs of the global athlete with investments in our global Brand House stores and e-commerce sites helping drive 70% growth in international,” Plank said. “With our continued investments across people, systems, and digital, we are confident in our ability to build upon this tremendous momentum, reinforcing our belief that we are just getting started in becoming the next great global brand."



A key factor in the company’s better-than-expected fourth quarter performance was growth in the direct-to-consumer business which includes the company’s 191 stores and accounts for 36% of revenue and grew by 25%. Under Armour ended the year with 191 retail locations, consisting of 30 of its full-line flagship stores called Brand House and 161 outlet stores called Factory House. The company opened 45 new stores in 2015.



Going forward, Under Armour shared expectations that envision 2016 being the company’s best year ever. Revenues are expected to reach nearly $5 billion, a 25% increase from the just ended fiscal year. Operating income is also expected to growth 25%, consistent with guidance shared in September when the company hosted an investor conference.



"In 2016 we celebrate our 20th year in business. We started by redefining the sports apparel industry through performance fabrics and today we are raising the bar for what athletes expect across all of their health and fitness needs,” Plank said.



In addition to innovation in core categories, Plank described progress the company has made in its Connected Fitness business.



"In Connected Fitness, we ended 2015 with nearly 160 million unique registered users across our platform that logged nearly eight billion foods and two billion activities during the year,” Plank said. “Earlier this month at the Consumer Electronics Show, we unveiled the new UA Record, the digital dashboard app for your health and fitness, and a suite of new products led by Under Armour HealthBox, the world's first complete Connected Fitness system. Working seamlessly together, these products create the framework for all athletes to measure their health and fitness. Now with a more complete picture of our consumer, we are establishing our data-driven math house that will provide us with real-time information to make better decisions and build even better products. More importantly, it will provide deeper insights, recommendations, and personalized content to empower consumers to live healthier lives."