No Longer the Enemy, Cotton Raises Under Armour’s Value
February 1, 2011 By Matt Townsend
Bloomberg
Under Armour Inc., the sportswear maker, rose as much as 9 percent after increasing its sales forecast for the year. The company also announced its first cotton apparel line.
Under Armour, which surpassed $1 billion in annual sales for the first time last year, had described cotton as the enemy in promoting its synthetic apparel line that helps sweat evaporate. The company has embraced cotton because many consumers like the feel of it and wear it in casual settings, said Michael Binetti, an analyst for UBS Securities in New York.
The new line, called Charged Cotton, wicks away sweat like the company’s synthetic apparel, Under Armour said in a statement. Advertising for the product will include a Super Bowl commercial with New England Patriots quarterback Tom Brady.
“This is a huge category that they’ve never been in,” Binetti said. The active sportswear market in the U.S. is $15 billion and $12 billion of that are cotton products, he said.
Sales will be as much as $1.35 billion this year, surpassing guidance of $1.29 billion in October, the Baltimore- based company said today in a statement. Under Armour will start shipping its first cotton performance T-shirts in February and they will sell for $25 each, Chief Executive Officer Kevin Plank said in a conference call with analysts.
Under Armour rose $4.80, or 8.9 percent, to $58.68 at 10:19 a.m. in New York Stock Exchange composite trading. The stock earlier touched $58.70, the biggest gain since May 26. The shares have almost doubled in the past year.
Fourth-quarter net income rose 51 percent to $22.9 million, or 44 cents a share, from $15.2 million, or 30 cents a share, a year earlier. Profit excluding some one-time items was 40 cents a share in the quarter ended Dec. 31. Analysts expected 37 cents, the average of 25 estimates in a Bloomberg survey. Revenue rose 36 percent to $301.2 million.
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