Under Armour (UA)
Q4 2011 Earnings Call
January 26, 2012 8:30 am ET
Brad Dickerson - Chief Financial Officer and Principal Accounting Officer
Tom Shaw -
Kevin A. Plank - Founder, Chairman, Chief Executive Officer and President
Michelle Tan - Goldman Sachs Group Inc., Research Division
Omar Saad - ISI Group Inc., Research Division
Camilo R. Lyon - Canaccord Genuity, Research Division
Kate McShane - Citigroup Inc, Research Division
Sam Poser - Sterne Agee & Leach Inc., Research Division
Michael Binetti - UBS Investment Bank, Research Division
Previous Statements by UA
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Good day, ladies and gentlemen, and welcome to the Under Armour Inc. Fourth Quarter Earnings Webcast and Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to your host, Tom Shaw. Sir, you may begin.
Thanks, Anne, and good morning to everyone joining us on today's conference call.
During the course of this call, we'll be making projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially. These risks and uncertainties are described in our press release and in the Risk Factors section of our filings with the SEC. The company assumes no obligation to update forward-looking statements to reflect events or circumstances after the day on which the statement is made or to reflect the occurrence of unanticipated events.
Joining us on today's call will be Kevin Plank, Chairman, CEO and President; followed by Brad Dickerson, our Chief Financial Officer, who will discuss the company's financial performance for the fourth quarter and full year 2011, followed by an update to our 2012 outlook. After their prepared remarks, Kevin and Brad will be available for a Q&A session that will end at approximately 9:30 a.m. Finally, a replay of this teleconference will be available at our website at approximately 11 a.m. Eastern Time today.
And with that, I'll turn it over to Kevin Plank.
Kevin A. Plank
Thanks, Tom, and good morning, everyone. At Under Armour, we don't spend a great deal of time looking in the rearview mirror. We are the athletic brand of this generation and the next. Our consumer, like [indiscernible] in our lifetime, is focused on the next great product, the next great athlete and the next great story from our brand. And to better understand how we will deliver our story to this generation of athletes, we think our 2011 results illustrate how we continue to resonate with our consumers through product, communication and relentless innovation that makes all athletes better.
So this morning, I want to cover 2 specific objectives for Under Armour in 2012. First, how we will continue to move beyond our core compression heritage, while maintaining the most authentic and profitable position in that space. And secondly, how we are leveraging that premium brand position to greatly expand our addressable markets. So first, a quick look at the 2011 scoreboard. We saw revenue growth for the year of 38%, our strongest growth since 2007. We added over $400 million in revenue in 2011, essentially doubling the size of our business since just 2007. And importantly, we leveraged that strong revenue growth despite gross margin pressure to deliver operating profit growth of 45%.
Our apparel business remains a key growth driver for our brand. And 2011 is a shining example of our ability to consistently expand our reach in this most critical piece of our business. We grew apparel revenues 31% this past year after growing it 31% in 2010. But my focus this morning is not as much on those impressive numbers as much as it is on the makeup of that growth. We are a brand that was founded on compression, and we are the market leader there. Equally important is that we continue to maintain our premium position in compression, both from a performance and a pricing-integrity platform. But as we laid out on our Investor Day last June, we are now in a strong position to also focus our resources beyond the compression category. And I'm very proud to say that 2011 was a great illustration of our team taking a strong step outside the compression category and bringing our brand of innovation to a much broader audience of athletes.
Our biggest and most successful mission [ph] in 2011 were not about tight-fitting baselayer products. Instead, they are about our ability to bring Under Armour's brand of innovation that will not [ph] changes the way an athlete use our product to that broader audience we've discussed.
Charged Cotton. No question, the compression market is our heritage. A category that we originated in '96 and has now become a staple in the athletic apparel business. It's not that we didn't like cotton, we just didn't like the way that it performed. So we did something about it. And in 2011, we redefined what athletes have come to expect from their apparel. We see Charged Cotton as a path of nearly quadrupling our addressable market to include the entire $12 billion active use market and help grow the lines of a much larger $58 billion activewear market over time.
So while we have built a $1 billion apparel brand largely on synthetic compression products, the path forward will have a materially different feel to it. So knowing that our consumer is keenly focused on next, we quickly brought the next innovation in cotton to market with the introduction of our Storm product. Storm is truly the next generation of casual outerwear. We've taken the classic cotton sweatshirt with its heavy weight feel and made it water resistant, so water rolls right off. By reinventing [indiscernible], we again make our brand more accessible to a broader audience of athletes.
A few more examples of us taking Under Armour innovation to new levels, like E39, the true star of the 2011 and upcoming 2012 NFL Combine. Yes, it's a compression garment, but the story was not just the fabric but how the electronics in the shirt measure your body in a new way, including horsepower and g-force, as well as heart and breathing rates, a product we will be bringing to market shortly.
And Charge RC, a lightweight running shoe with the true Under Armour DNA and a great statement about who we are as a footwear brand, with both its materials, fit and $120 price point.