Under Armour 2010 Annual Report Download - page 3

WE ARE 14 YEARS INTO THIS THING...
and it feels like we are just getting started. I say that with pride at the results we
posted in 2010 and with confi dence that we are laying the right foundation for our
long-term continued growth.
We believe we are still in the early stage of the Under Armour story for three
primary reasons: fi rst, we have built an incredibly powerful and authentic Brand
in a relatively short time; second, our product line remains narrow relative to the
opportunities in apparel, footwear and other categories where our Brand can
play; and third, we have yet to truly establish our Brand outside of North America.
So while the opportunities for our Brand seem boundless, we remain focused
on execution and 2010 was a great example of what the Under Armour Brand
can achieve.
We crossed an important threshold in 2010, surpassing the $1 billion net revenue
mark, with net revenues growing 24% to $1.064 billion. Apparel net revenues
increased 31% to $853.5 million driven by strength across the Men’s, Women’s,
and Youth apparel products. Direct-to-Consumer net revenues grew 57% over
the prior year. And as evidence that our execution is focused on returning value
to our shareholders, earnings per share increased 46% to $1.34.
While passing the $1 billion revenue mark is an important milestone for us, it
really underscores the tremendous opportunities that are still available to our
Brand. We accomplished that $1 billion in revenues largely on the strength of our
North American apparel business, much of which is still compression and base
layer product. The opportunities that exist within our fi ve Growth Drivers – Men’s
and Women’s Apparel, Footwear, Direct-to-Consumer and International – each
represent expansive opportunities for our Brand to grow, and we continue to
invest for long-term growth.
In Apparel, we have built a strong foundation of trust with athletes and we
continue to build on that equity through continued innovation on the fi eld of play.
Our apparel growth will be driven largely by maintaining and growing our core
UA consumer while bringing the Brand to new athletes through our expanding
breadth of product. In 2010, our core of female athletes continued to expand
as our growth rate in Women’s Apparel outpaced our strong growth rate in
Men’s Apparel.
When we fi rst brought the idea of moisture-wicking compression apparel to
the market in 1996, our goal was to make athletes rethink expectations for their
apparel. And with the launch of Charged Cotton™
in March 2011 – the next
chapter in Under Armour’s innovation platform – we will raise expectations once
again. Charged Cotton dries up to fi ve times faster than regular cotton and will
bring a new level of performance to a category where expectations have been low.
We recognize the value of our continued product leadership in apparel and are
working to bring that same level of innovation to our expanding line of footwear.
Our initial entry in basketball footwear was made stronger by our ability to test
our basketball footwear on players for several years before we brought this
product to market at the end of 2010.
What drives our team is being held to the demanding expectations of the world’s
top athletes. In the case of New England Patriots QB and NFL MVP Tom Brady,
we have invested in our footwear business to make a football cleat that could be
worn with confi dence by the league’s best player. The same logic rings true with
our relationship with the Tigers of Auburn University, college football national
champions. In both cases, we were able to reinforce our reputation for making
all athletes better because they trust that the Under Armour Brand will perform
on the fi eld of play.
Further, we are still in the early stages of our footwear business. Having our
baseball cleats on national champions University of South Carolina in just our
fourth year in that business and our football cleats on Auburn in year fi ve tells us
we have the capacity to be a great footwear company. With running launching
in 2009 and basketball late in 2010, we anticipate those critical categories to
deliver great results for us over time as well.
Our fourth growth driver, Direct-to-Consumer, continued to excel in 2010
and was an important component of our improvement in full-year gross
CHAIRMAN’S 2010 LETTER TO SHAREHOLDERS
GEORGES ST-PIERRE IMMA CHAMPION
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margins which expanded to 49.9% compared to 47.9% in the
prior year. Expanding our presence in our Direct-to-Consumer
sales channel is a key element of our strategy to reach new
consumers, be it online or in our specialty or Factory House
outlet stores.
In addition, the knowledge we gain by operating our own retail
stores makes us better partners with our strong wholesale
account base. The continued strength of both our Direct-to-
Consumer sales channel and our wholesale U.S. Apparel
affords us the opportunity to be patient in areas such as
Footwear and International where we continue to invest for
sustainable growth.
Since the very early days of Under Armour, we have
understood the magnitude of being the next great athletic
Brand and have invested to build a sound foundation from
which to grow upon. We have been investors with an eye on
the long term, whether those investments were in systems,
innovation, new categories, or building our team.
In our International business, we bring a performance
Brand that speaks to athletes of all types, be it on the
soccer pitch or the ski slopes. Creating the infrastructure
to bring that product to the global market is a tremendous
challenge to a company growing at the pace that we are
in North America.
The success of our licensing partner in Japan, whose
sales surpassed the $100 million U.S. dollar mark in 2010,
is evidence that our Brand can play well outside of the
U.S. In addition to these strong results in Japan, we
continue to make progress in key markets in Europe
and are taking prudent steps to build the foundation for
our long-term presence in critical growth markets such
as China.
In summary, we took many important steps in 2010
toward our goal of becoming THE Athletic Brand of
this Generation. It is humbling to think about passing
the $1 billion revenue mark while at the same time
being confi dent that our Brand is still in its early
stages. But at the simplest level, our formula hasn’t
truly changed. Our appetite to make all athletes
better remains strong, whether it’s on the fi eld of the
BCS National Championship Game, a ski mountain
in Utah where the next Lindsey Vonn is training, or
a batting cage in Tokyo where a teenager is getting
in his last few swings before they turn out the
lights. Our trip is still just getting started and we
remain humble and hungry as this next part of the
journey begins.
Humble & Hungry,
Kevin A. Plank
President, Chief Executive Offi cer and
Chairman of the Board of Directors,
Under Armour, Inc.
NET REVENUES GROWING 24% TO $1.064 BILLION
EARNINGS PER SHARE INCREASED 46% TO $1.34
AND WITH THE LAUNCH OF CHARGED COTTON
IN MARCH 2011– THE NEXT CHAPTER IN UNDER
ARMOUR’S INNOVATION PLATFORM – WE WILL
RAISE EXPECTATIONS ONCE AGAIN.