Under Armour’s management guidance for 2016

Under Armour’s (UA) management expect to generate sales of more than $4.9 billion in 2016, an increase of 25% year-over-year. The company expects a larger chunk of the growth to be skewed toward 1H16, in the high-20s range, partly due to higher expected Footwear and International segment sales, as well as more liquidation sales[1. According to guidance provided by Brad Dickerson, former CFO of UA].

In 1Q16, Under Armour’s sales are expected to come in at ~$1.0 billion, according to consensus Wall Street analyst estimates. This implies an ~28.8% growth rate over 1Q15.

How Under Armour’s Management Guidance Compares with Its Peers

Operating income growth to come in slower than revenue growth

Under Armour’s (UA) operating income is expected to grow more slowly than its earnings, by ~23% to $503 million in 2016. The company’s sales mix is expected to change in 1Q16. The relatively higher footwear and international sales, which earn lower margins than the apparel category, would see its operating income grow more slowly than revenue.

Its profitability is also expected to decline. Under Armour’s growth investments are likely to pressure the expense side of its income statement, at least in the short-to-medium term.

The revenue and earnings outlook for some of Under Armour’s rivals Nike (NKE), Lululemon Athletica (LULU), and Columbia Sportswear (COLM) is also upbeat.

  • Nike expects to grow its top line at a mid-single-digit rate in both the fiscal fourth quarter and fiscal 2016.
  • Lululemon Athletica (LULU) expects to grow its revenue by 10.9% and by 13.2% to $2,285 million–$2,335 million in fiscal 2017. In fiscal 1Q17, revenues of between $483 million–$488 million is expected, an implied growth rate of 14%–15.2% over fiscal 1Q16.
  • Columbia Sportswear (COLM) expects to grow (IWF) its revenue at a mid-single-digit rate in 2016. Its operating income is expected to come in at between $257 million–$267 million, implying a growth rate of 2.9%–6.9% over 2015.

We’ll discuss Under Armour’s earnings per share expectations in the next article.

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