Under Armor Earnings Fall Short
Under Armour Inc.’s fourth-quarter profit sank 51 percent and the sportswear maker is staying mum on its 2009 outlook as it tangles with a slumping retail environment.
Earnings dropped to $8.3 million, or 17 cents per share, in the quarter ended Dec. 31. That’s compared with a profit of $16.9 million, or 35 cents per share, during the same period a year prior.
Sales during the fourth-quarter grew 2.5 percent to $179.3 million.
The earnings were on par with Wall Street’s forecast. Analysts polled by Thomson Reuters expected earnings of 17 cents per share on revenue of $179.7 million.
Baltimore-based Under Armour (NYSE: UA) said sales were impacted by a slowdown in its U.S. wholesale business and increased cancellations and returns. The company was also impacted by unfavorable foreign currencies. On the flip side, Under Armour said its footwear business more than doubled in 2008 to $84.8 million in sales.
CEO Kevin A. Plank said Thursday the company remains optimistic on its long-term growth opportunities, but for now is hunkering down to weather what looks to be a tough 2009.
“There’s been a lot of discussion where the consumer is heading,” Plank said on a conference call with analysts Thursday. “We are very aware of the challenges facing all brands in this environment.”
Under Armour began to see sales slump in the last 35 to 40 days of the year leading up to the holiday season, Chief Operating Officer Wayne Marino said in an interview Thursday morning.
"Under Armour has probably never had this type of challenge before," Marino said. "But we've got strong brand equity and very, very strong price integrity in this market."
Under Armour’s success in “2010 and beyond will be significantly impacted by the decisions we make in 2009,” Plank added.
The biggest test for the 13-year-old company this year will be its entry into the nearly $5 billion U.S. running shoe market on Jan. 31. The line of six shoes are priced between $85 and $120. Plank told analysts the returns on Under Armour’s running shoe foray won’t be immediately obvious.
“You’re not going to be able to define the success of our running footwear by Monday,” Plank said. It’s an “11 to 12 month launch that will be defined at the end of 2009.”
Aside from the launch, Plank said Under Armour is “cautiously optimistic about 2009” and is looking at the year with the “appropriate degree of conservatism.”
The company will not open any new retail stores during the year.
Executives would not give a 2009 outlook “because of the volatile environment” when pressed by analysts Thursday.
Meanwhile, Under Armour also announced it secured a new three-year $180 million credit facility with PNC Bank (NYSE: PNC). The facility replaces an existing $100 million credit line the company had in place.
For 2008, Under Armour had net revenue of $725.2 million, up nearly 20 percent from last year. The company’s profit dropped 28 percent to $38.3 million. Inventory climbed in the year by $16 million to $182.2 million.
Inventory at the end of the year included $15 million in running footwear. The company’s inventory growth would have been flat without the running shoes, said Chief Financial Officer Brad Dickerson.
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