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Under Armour Profits Plunge More Than Half in Q2

Baltimore-based Under Armour hit the billion-dollar mark in revenue last quarter, but its profits took a tumble.

The active apparel and footwear company’s net revenues rose 28 percent to $1 billion in the three months ended June 30, compared with $784 million in the second quarter of last year. At the same time, however, operating income dropped 39 percent to $19 million—inclusive of a $23 million impairment related to Sports Authority’s liquidation—and net income decreased 58 percent, from $15 million to $6 million.

But Sports Authority appeared to be the only blight on the business in Q2. Wholesale net revenues were up 27 percent year-over-year to $635 million versus $501 million in the year-ago period, while the direct-to-consumer segment grew 28 percent year-over-year to $321 million compared to $251 million last year. On a regional basis, North America net revenue rose 22 percent year-over-year and international sales—representing 15 percent of total revenues in Q2—climbed 68 percent, or 72 percent on a currency neutral basis.

Category-wise, footwear was the big winner: revenues jumped 58 percent to $243 million, which the company attributed to the continued success of basketball, as well as growth in running and cleats. Bags and headwear helped accessories revenues increase 21 percent to $101 million. Apparel pulled in the most money ($613 million), but was only up 19 percent over last year, led by men’s and women’s training and golf.

Kevin Plank, chairman and chief executive officer, said Tuesday that Under Armour’s second-quarter performance underscored the importance of diversifying its business.

“In our largest category of apparel we continue to add more dimension with a sport category focus and we remain incredibly proud of the success of our international and footwear growth drivers,” he said, noting that Under Armour opened 60 international stores so far this year and entered two new markets. “Our international business continues to expand and to resonate with the global athlete. The Stephen Curry signature line has continued to drive strong momentum for the brand and our pinnacle football product, the Highlight Cleat, continues to lead the market.”

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To that end, 2016 net revenues are expected to reach $4.925 billion—up 24 percent over 2015—and operating income is projected to increase 8 to 9 percent to be in the range of $440 million to $445 million.

“In 2016, our ability to position the brand to capture the changing expectations of the consumer requires Under Armour to extend and grow in new and different ways. The authenticity we have gained with the athlete over the past 20 years has positioned Under Armour to widen our access through categories, channels and geographies,” Plank said. “Starting with our launch this fall of Under Armour Sportswear, which we are calling UAS, we will continue to find new opportunities to bring more consumers into the Under Armour brand, whether that is through compelling flagship retail, new partners in wholesale or on a digital platform. We remain focused on making all athletes better and driving consistent revenue growth quarter after quarter.”