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Q2 Earnings: Three Answers From Under Armour Inc (UA)

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Under Armour Inc (NYSE:UA)Shares of Under Armour Inc (NYSE:UA) are currently up more than 12% today after the apparel specialist announced its second-quarter earnings results.

Coincidentally, just a few days ago I posed three questions for Under Armour going into the report, so here’s what it had to say:

On making it to lucky 13
First, considering Q1 marked Under Armour Inc (NYSE:UA)’s 12th consecutive quarter of achieving at least 20% top-line growth, I wondered whether Under Armour would be able to keep up the pace to hit lucky number 13.

Sure enough, Under Armour made it look easy as net revenue rose a respectable 23% in the second quarter to $455 million.

In fact, growth in each of Under Armour Inc (NYSE:UA)’s business segments exceeded 20% last quarter, including a 21% increase in footwear to $82 million, 30% growth in accessories to $51 million, and apparel net revenue growth of 23% to $310 million, thanks largely to expansion of the company’s Storm and Charged Cotton product lines. Meanwhile, higher-margin direct-to-consumer net revenue made up 30% of total sales last quarter after growing 29%.

As a result, net income increased a whopping 163% to $18 million, while diluted earnings per share nearly tripled to $0.16 from $0.06 per share in the same year-ago period.

On keeping inventory in check
Next, remembering Under Armour Inc (NYSE:UA)’s growing pains in years’ past have resulted in uncomfortably high inventory levels, I wanted to know whether Under Armour has managed not only to continue keeping its inventory in check but also maintain a healthy balance sheet.

Once again, Under Armour increased its cash and equivalents by an impressive 57% year over year to $224 million, while at the same time decreasing its debt to $55 million — that’s down from $60 million last quarter and $74 million in the same year-ago period.

Curiously enough, Under Armour Inc (NYSE:UA) boosted its inventory by 29% year over year to $491 million this time around. However, this increase is perfectly acceptable given Under Armour’s sustained growth.

What’s more, given their current visibility, management also raised the company’s full-year guidance by telling investors they now expect sales in the range of $2.23 to $2.25 billion, representing growth of 22% to 23% over 2012, and 2013 operating income between $258 million to $260 million, good for growth of 24% to 25% over last year.

For those of you keeping track, remember Under Armour’s previous guidance called for sales of $2.21 to $2.23 billion and operating income between $256 to $258 million.

On international growth
Finally, given the fact domestic sales comprised 93% of Under Armour’s business last quarter, I wanted to know whether the rest of the world is beginning to embrace Under Armour Inc (NYSE:UA) as the company increasingly pushes its global ambitions.

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