Under Armour has announced financial results for the fourth quarter ended 31 December 2015. Net revenues increased 31% in Q4 2015 to US$1.17 billion compared with net revenues of US$895 million in the prior year’s period. (Full year 2015 net revenues increased 28% to US$3.96 billion.)
On a currency neutral basis, Q4 2015 net revenues increased 33% compared with the prior year’s period.
Operating income increased 21% in the fourth quarter of 2015 to US$178 million. Net income increased 21% and diluted earnings per share for the fourth quarter of 2015 were US$0.48 compared with US$0.40 per share in the prior year’s period.
Fourth quarter apparel net revenues increased 22% to US$865 million, led by growth in training, running, golf and basketball. Fourth quarter footwear net revenues increased 95% to US$167 million from US$86 million in the prior year’s period, ‘primarily reflecting the success of the Curry signature basketball line and expanded running offerings.’
Fourth quarter accessories net revenues increased 23% to US$97 million, ‘driven primarily by new introductions across the bags category.’ Direct-to-Consumer net revenues, which represented 36% of total net revenues for the fourth quarter, grew 25% year-over-year. International net revenues, which represented 12% of total net revenues for the fourth quarter, grew 70% year-over-year, or 85% on a currency neutral basis.
Kevin Plank, Chairman and CEO of Under Armour said, “Our core business remains incredibly strong and our 31% net revenue growth in the fourth quarter is clear evidence of the continued expansion in the breadth and depth of our brand.
“We delivered our 25th consecutive quarter of more than 20% net revenue 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.”
He continued, “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.”
Gross margin for the fourth quarter of 2015 was 48.0% compared with 49.9% in the prior year’s period, primarily reflecting negative impacts of approximately 90 basis points from sales mix, specifically from strong footwear growth, approximately 80 basis points from the continued strength of the US Dollar, and approximately 30 basis points from higher liquidations.
Selling, general and administrative expenses as a percentage of net revenues were 32.8% in the fourth quarter of 2015 compared with 33.6% in the prior year’s period, primarily reflecting the planned timing of marketing expenses and lower incentive compensation expenses.
Review of full year operating results
For the full year 2015, net revenues increased 28% to US$3.96 billion, compared with US$3.08 billion in the prior year, and compared with the company’s prior outlook of US$3.91 billion. Operating income grew 15% to US$409 million in 2015 and compared with the company’s prior outlook of US$408 million.
Total costs of the company’s two Connected Fitness acquisitions completed in the first quarter of 2015, comprised of operating losses, one-time transactions costs, and non-cash amortization charges of the intangible assets generated from the acquisitions, were US$23 million for 2015.
Diluted earnings per share for 2015 increased 11% to US$1.05 compared with US$0.95 per share in the prior year, inclusive of a US$0.10 dilutive impact of the Connected Fitness acquisitions.
Apparel net revenues increased 22% to US$2.80 billion compared with US$2.29 billion in the prior year, led by growth in golf, running and team sports. Footwear net revenues increased 57% to US$678 million during 2015, reflecting expanded offerings in running and basketball.
Accessories net revenues increased 26% to US$347 million during 2015. Direct-to-Consumer net revenues, which represented 30% of total net revenues for 2015, grew 27% over the prior year. International net revenues, which represented 11% of total net revenues for 2015, grew 69% year-over-year, or 84% on a currency neutral basis.
Gross margin for 2015 was 48.1% compared with 49.0% in 2014, primarily reflecting a negative 70 basis point impact from the continued strength of the US Dollar. Selling, general and administrative expenses as a percentage of net revenues were 37.8% for 2015 compared with 37.5% for 2014, primarily reflecting broad-based investments to support global growth initiatives.
Updated 2016 outlook
Based on current visibility, the Company expects 2016 net revenues of approximately US$4.95 billion, representing growth of 25% over 2015 and 2016 operating income of approximately US$503 million, representing growth of 23% over 2015, in line with the financial targets outlined at the company’s September 2015 Investor Day.
Below the operating line, the company expects interest expense of approximately US$35 million, an effective full year tax rate of approximately 38.5%, and fully diluted weighted average shares outstanding of approximately 223 million for 2016.
Kevin Plank added, “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 & fitness needs. Our footwear business, driven by the outstanding success of our signature Curry basketball line, will deliver new iterations of signature product across premium price points and distribution throughout the year.
“Our momentum in footwear extends across categories, including elevated running styles where we are doubling our offerings priced above US$100 including the launch of our first smart shoe, SpeedForm Gemini 2 RE, and SpeedForm Slingshot, made with a 3D knitting process to deliver incredible fit and feel.
“In apparel, we will continue to lead with purposeful innovation through the debut of two new HeatGear apparel cooling technologies, Microthread and CoolSwitch, while also launching a proprietary ColdGear insulation story called Reactor.”
“In Connected Fitness, we ended 2015 with nearly 160 million unique registered users across our platform that logged nearly 8 billion foods and 2 billion activities during the year. Earlier this month at the Consumer Electronics Show, we unveiled the new UA Record, the digital dashboard app for your health & fitness, and a suite of new products led by Under Armour HealthBox, the world’s first complete Connected Fitness system.”
He continued, “Working seamlessly together, these products create the framework for all athletes to measure their health & 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.”
Plank concluded, “The Under Armour brand has built tremendous equity over the past 20 years and our financial results are a reflection of that strength. Quarter after quarter, year after year, we continue to post meaningful growth across our core businesses with significant opportunity to grow as we diversify both our product portfolio and our geographic reach.
“From shirts and shoes to your connected life, Under Armour will continue to be a leader in innovation to make all athletes better and redefine expectations for what a sports brand should be.”