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Under Armour (UA) Posts In Line Q2 Earnings; View Intact
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Under Armour, Inc. (UA - Free Report) reported second-quarter 2016 earnings of 1 cent a share – including 3 cents as impairment charges related to the liquidation of Sports Authority – that came in line with the Zacks Consensus Estimate. However, the quarterly earnings declined from 3 cents delivered in the year-ago quarter.
Aided by continued strong performance of the Apparel, Footwear and Accessories categories, total revenue came in at $1,000.8 million, up 27.7% year over year, but fell marginally short of the Zacks Consensus Estimate of $1,003 million. However, this Baltimore-based company reiterated its full-year net revenue projection.
The company, which competes with giants such as Adidas and Nike, Inc. (NKE - Free Report) in the sports apparel business, is keen on expanding its footprint and enhancing brand recognition to get an edge, and the deal with rising athletes provides a platform to showcase its brands.
Under Armour’s largest product category, Apparel, once again reported strong sales. Apparel sales jumped 18.9% to $612.8 million buoyed by growth in training and golf, while Footwear net revenue soared 58% to $242.7 million during the quarter, driven by demand for the Curry signature basketball line and growth in running and cleated categories. Net revenue in the Accessories category advanced 21.3% to $100.7 million, buoyed by the bags and headwear category, while Licensing revenue grew 16% year over year to $21 million.
The company’s Connected Fitness segment reported massive year-over-year growth of 73.3% to $23.5 million. This was driven by the acquisitions of Endomondo and MyFitnessPal. These buyouts, along with its existing MapMyFitness and UA RECORD suite of applications, helped the company to form one of the largest digital health and fitness communities.
Under Armour recorded a 27% surge in wholesale net revenue to $635 million and a 28% increase in Direct-to-Consumer net revenue to $321 million. North America net revenue jumped 22%, whereas international net revenue, which represented 15% of total net revenue, increased 68% or 72% on a currency neutral basis.
Gross profit escalated 26% to $477.6 million. However, gross margin contracted 70 basis points to 47.7% due to sales mix, partially offset by improved product cost margins.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $121.2 million, down 18.7% from the prior-year period, while total debt (including current maturities) was $865.1 million compared with $712.4 million in the prior-year period. Shareholders' equity at the end of the quarter was $1,771.3 million.
Guidance
Under Armour maintained its 2016 guidance. Management expects net revenue for 2016 to be nearly $4.925 billion. This represents an increase of 24% over the 2015 level. Operating income is expected to be in the range of $440 million to $445 million, signifying growth of 8% to 9% over 2015. The company projects interest expense of about $32 million for the year.
Zacks Rank
Under Armour currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the retail sector include American Eagle Outfitters, Inc. (AEO - Free Report) , sporting a Zacks Rank #1 (Strong Buy) and Hanesbrands Inc. (HBI - Free Report) , carrying a Zacks Rank #2 (Buy).
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Under Armour (UA) Posts In Line Q2 Earnings; View Intact
Under Armour, Inc. (UA - Free Report) reported second-quarter 2016 earnings of 1 cent a share – including 3 cents as impairment charges related to the liquidation of Sports Authority – that came in line with the Zacks Consensus Estimate. However, the quarterly earnings declined from 3 cents delivered in the year-ago quarter.
Aided by continued strong performance of the Apparel, Footwear and Accessories categories, total revenue came in at $1,000.8 million, up 27.7% year over year, but fell marginally short of the Zacks Consensus Estimate of $1,003 million. However, this Baltimore-based company reiterated its full-year net revenue projection.
UNDER ARMOUR-A Price, Consensus and EPS Surprise
UNDER ARMOUR-A Price, Consensus and EPS Surprise | UNDER ARMOUR-A Quote
The company, which competes with giants such as Adidas and Nike, Inc. (NKE - Free Report) in the sports apparel business, is keen on expanding its footprint and enhancing brand recognition to get an edge, and the deal with rising athletes provides a platform to showcase its brands.
Under Armour’s largest product category, Apparel, once again reported strong sales. Apparel sales jumped 18.9% to $612.8 million buoyed by growth in training and golf, while Footwear net revenue soared 58% to $242.7 million during the quarter, driven by demand for the Curry signature basketball line and growth in running and cleated categories. Net revenue in the Accessories category advanced 21.3% to $100.7 million, buoyed by the bags and headwear category, while Licensing revenue grew 16% year over year to $21 million.
The company’s Connected Fitness segment reported massive year-over-year growth of 73.3% to $23.5 million. This was driven by the acquisitions of Endomondo and MyFitnessPal. These buyouts, along with its existing MapMyFitness and UA RECORD suite of applications, helped the company to form one of the largest digital health and fitness communities.
Under Armour recorded a 27% surge in wholesale net revenue to $635 million and a 28% increase in Direct-to-Consumer net revenue to $321 million. North America net revenue jumped 22%, whereas international net revenue, which represented 15% of total net revenue, increased 68% or 72% on a currency neutral basis.
Gross profit escalated 26% to $477.6 million. However, gross margin contracted 70 basis points to 47.7% due to sales mix, partially offset by improved product cost margins.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $121.2 million, down 18.7% from the prior-year period, while total debt (including current maturities) was $865.1 million compared with $712.4 million in the prior-year period. Shareholders' equity at the end of the quarter was $1,771.3 million.
Guidance
Under Armour maintained its 2016 guidance. Management expects net revenue for 2016 to be nearly $4.925 billion. This represents an increase of 24% over the 2015 level. Operating income is expected to be in the range of $440 million to $445 million, signifying growth of 8% to 9% over 2015. The company projects interest expense of about $32 million for the year.
Zacks Rank
Under Armour currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the retail sector include American Eagle Outfitters, Inc. (AEO - Free Report) , sporting a Zacks Rank #1 (Strong Buy) and Hanesbrands Inc. (HBI - Free Report) , carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>