Under Armour reports earnings boost in fourth quarter

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Sports apparel maker Under Armour Inc. reported a 42 percent gain in fourth-quarter earnings on Thursday and said the company experienced its highest overall annual growth rate since 2007 as it continues to roll out new products.

Net income rose to $33 million for the three months ending Dec. 31, compared with $23 million in the fourth quarter of 2010, the Baltimore-based company said. Diluted earnings per share rose to 62 cents per share from 44 cents per share.

Net revenues were up 34 percent to $403 million, compared with net revenues of $301 million in the similar period of 2010. Under Armour said its net sales from apparel jumped 27 percent to $323 million, thanks to continued strength in its fleece and "charged cotton" merchandise.

Also, sales in the direct-to-consumers category, including purchases made at Under Armour's own retail stores and online, represented nearly 40 percent of total net revenues and grew 50 percent on a year-over-year basis.

The company attributed a 43 percent gain in footwear net revenue — a jump to $31 million from $22 million — to last year's introduction of running shoes.

"The company continues to do what it does best, and that's get out new products," said David Meier, an Alexandria, Va.-based senior analyst for The Motley Fool, a financial services company and website. "The brand is solid. The balance sheet is solid."

Fourth-quarter operating income grew 57 percent, the company said, to $55 million compared with $35 million in the fourth quarter of 2010.

The company said its fourth-quarter gross margin of 51.6 percent, compared with 51.7 percent in the previous year's fourth quarter, reflected less favorable wholesale apparel product margins in North America.

The company reported its highest overall annual growth rate since 2007, with net revenues for the full year up 38 percent.

Kevin Plank, Under Armour's chairman, chief executive and president, emphasized in a statement that the firm's apparel business had surpassed the $1 billion mark last year.

Meier attributed the company's strong growth in part to its ability to roll out new products, such as its new running shoes and storm fleece garments.

"The new products are resonating with customers," he said.

Additionally, Meier said, the company has identified new channels for its products, such as Nordstrom department stores, and is seeing growth in sales at its retail stores and online. He said he hopes to see the company continue to lower its costs in making and supplying products.

Under Armour is forecasting operating income growth this year at the upper end of its 20 percent to 25 percent long-term growth target. However, net revenues will likely grow at the low end of its 20 percent to 25 percent growth target instead of at the higher end, as the company had previously expected.

Plank said the company would continue "to target distribution where our consumer is looking for us and that is appropriate for our brand."

lorraine.mirabella@baltsun.com

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