US Under Armour reports second quarter 2015 and raises full year outlook
Under Armour, Inc. announced the financial results for the second quarter ended June 30, 2015. Net revenues increased 29% in the second quarter of 2015 to USD 784 million compared with net revenues of USD 610 million in the prior year’s period. On a currency neutral basis, net revenues increased 31% compared with the prior year’s period.
Net income decreased 17% in the second quarter of 2015 to USD15 million compared with USD18 million in the prior year’s period and diluted earnings per share for the second quarter of 2015 were USD 0.07 compared with USD 0.08 per share in the prior year’s period, inclusive of the impacts of the Endomondo and MyFitnessPal acquisitions.
Second quarter apparel net revenues increased 23% to USD 515 million compared with USD 420 million in the same period of the prior year, driven primarily by enhanced product offerings in base layer and training. Second quarter footwear net revenues increased 40 % to USD 154 million from USD 110 million in the prior year’s period, primarily reflecting continued product expansion across the running category and ongoing excitement around Stephen Curry signature product. Second quarter accessories net revenues increased 39% to USD83 million from USD 60 million in the prior year’s period, driven primarily by new introductions across the bags category. Direct-to-Consumer net revenues, which represented 32% of total net revenues for the second quarter, grew 33% year-over-year. International net revenues, which represented 11 % of total net revenues for the second quarter, grew 93 % year-over-year.
Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, “More than ever before, this year has highlighted that the right investments are key to not only driving near-term results, but building the foundation for the unlimited potential of the Under Armour Brand. In the second quarter of 2015, we witnessed historic performances and accolades from our incredible portfolio of athletes including the NBA’s MVP and World Champion Stephen Curry, PGA Tour pro Jordan Spieth who won this year’s Masters & U.S. Open and the American Ballet Theatre’s first-ever African American female principal dancer Misty Copeland. Leveraging these unprecedented successes for our Brand remain critical as we continue to align our strategy to attack key growth categories and drive deeper connections with the athlete. Some of these powerful connections are already evident across our distribution, where we are investing in expanded relationships with our key sporting goods and mall partners, as well as supporting our own direct-to-consumer capabilities including new Brand House openings across both the U.S. and our International markets. It also means continuing to build one of our key foundations for future growth with Connected Fitness. With our Connected Fitness community now totalling more than 140 million unique registered users and adding on average more than 100000 new athletes each day, we are pleased with our progress and believe we are still in the early stages of uncovering the potential of what the world’s largest digital health and fitness community can do to build consumer engagement and drive healthier lifestyles.”
Gross margin for the second quarter of 2015 was 48.4% compared with 49.2% in the prior year’s period, primarily reflecting the impacts of foreign exchange rates and planned air freight expenses. Selling, general and administrative expenses as a percentage of net revenues were 44.3% in the second quarter of 2015 compared with 43.5% in the prior year’s period, primarily reflecting investments to support Connected Fitness and the opening of global Brand House stores in the quarter. Second quarter operating income decreased 8% to USD32 million compared with USD35 million in the prior year’s period.
Cash and cash equivalents decreased 43% to USD171 million at June 30, 2015 compared with USD300 million at June 30, 2014. Inventory at June 30, 2015 increased 26% to USD837 million compared with USD662 million at June 30, 2014. Total debt increased to USD716 million at June 30, 2015 compared with USD197 million at June 30, 2014, primarily reflecting borrowing to fund the two Connected Fitness acquisitions.
The Company had previously anticipated 2015 net revenues of approximately USD3.78 billion, representing growth of 23% over 2014, and 2015 operating income in the range of USD 400 million to USD 408 million, representing growth of 13% to 15% over 2014. Based on current visibility, the Company expects 2015 net revenues of approximately USD 3.84 billion, representing growth of 25% over 2014 and 2015 operating income in the range of USD405 million to USD 408 million, representing growth of 14% to 15% over 2014. The 2015 guidance continues to reflect the net dilutive impact from the Connected Fitness acquisitions, as well as the impact of the strong dollar negatively impacting our operating margin within our international businesses.
Brad Dickerson, COO/CFO of Under Armour, Inc., stated, “The ongoing strength of our Brand and execution of our business plan give us confidence in raising our full year top line outlook. In addition, the confluence of our sports marketing success stories has provided a unique opportunity to drive investment toward areas that we see are key to long-term sustainable growth and we plan to take advantage of this dynamic in the back half of 2015. At the same time, we are increasing our focus on developing sustainable business process improvements and better connecting the components of our value chain to more fully capitalize on our Brand’s momentum each season going forward.