When Under Armour (NYSE:UA) released first-quarter 2016 results last week, investors were rightly pleased. Under Armour's quarterly revenue climbed an impressive 30% year over year, to $1.05 billion, and would have risen 32% had it not been for the negative effects of foreign exchange. Operating income rose 26% year over year, to $35 million, while net income jumped 63%, to $19 million and rose 33% on a per-share basis, to $0.04.
Looking forward, Under Armour now anticipates full-year revenue will increase 26%, to $5 billion, while operating income should increase 23% to 24% over 2015, to a range of $503 million to $507 million. By comparison, Under Armour's previous guidance called for 2016 revenue of $4.95 billion, and operating income at the low end of its new range.
But Under Armour is about more than just its top and bottom lines. That's why I think investors would be wise to dig deeper in an effort to better appreciate the driving factors underlying this promising business. One of the best ways to do so is by dissecting management's comments following each quarterly release in a conference call with analysts.
Here are five of the most crucial points they discussed during this quarter's call.
1. China is leading international growth
"In this past quarter, we earned more revenue in China in 90 days than we did in the full year of 2014. We have grown judiciously in this critical market, building a solid foundation of core product, with plans to add an additional 120 owned and partner brand health stores in Greater China throughout 2016."
-- Under Armour founder and CEO, Kevin Plank
International sales climbed 56% year over year to represent 14% of Under Armour's total revenue in Q1. And Under Armour CFO Chip Molloy elaborated later in the call that China revenue nearly tripled from the same year-ago period, which now makes it Under Armour's largest International country in terms of sales. Perhaps most encouraging, Under Armour is also seeing a higher mix of both footwear and women's products in China than in the U.S., demonstrating that the company is successfully diversifying on a global scale away from its narrower male-centric athletic-apparel roots in the United States.
2. Women's will soon be a $1 billion business
"[O]ur women's e-commerce growth rate continues to outpace the growth on the men's side, a direct indicator of the strength of demand for our women's product, where we deliver upon her expectations for performance and style. This year, our women's business will surpass $1 billion [...] -- a milestone we are proud of -- that puts us among very select company in the space that continues to attract a lot of interest and competition."
Recall that earlier this year, Under Armour stock plunged, as analysts worried that the company was losing market share and suffering declining average selling prices. Further, those analysts stated that the trend was particularly pronounced in women's apparel and came despite what they described as "significant marketing investment in the division last year."
To be fair, I argued at the time that this assertion was off base, especially as Plank had previously revealed that Under Armour's efforts to expand the women's division were still in their infancy. After this quarter's results, however, it's clear that Under Armour is continuing to take market share in women's as it delivers on its goal to make it even larger than its core men's business over the long term.
3. Stephen Curry is accelerating footwear sales
"[T]he footwear MVP for Under Armour, just like he is in the NBA, is Stephen Curry. Our strong momentum in the fourth quarter of 2015 carried through into the new year, with the Curry Two topping the signature shoe charts consistently week after week. Stephen's phenomenal season has brought unprecedented attention to our overall footwear business, and especially basketball footwear, and is driving both door expansion with our key mall partners and credibility with the hard-core basketball kid. [...] We recognize that Stephen's ascent to the top of the basketball world creates a once-in-a-generation opportunity for our brand, and our team is laser focused on delivering against that potential."
To be fair, it remains to be seen whether Stephan Curry's recent absence in the playoffs (because of a knee injury) will have any negative repercussions for Under Armour, but it's hard to understate the positive impact his latest record-breaking season has already had on Under Armour's basketball footwear business. That's also not to say Under Armour's other footwear offerings haven't found success; the company did have several other notable launches during the quarter, including its first connected smart shoe, and its sold-out $300 UA Architect shoe, which features a 3-D-printed midsole. Nonetheless, investors should be encouraged that Under Armour is wisely making the most of its star sponsored athlete.
4. Mobile is more important than ever
"[W]e now operate 26 global sites, and for the first time more than half of our U.S. traffic this quarter came through mobile devices. The rapid transformation in how people access our brand has been astounding. It's critically important that we reach our consumer where and how they shop, and our focus is on improving our e-commerce consumer experience, on both our own sites as well as our retail partner sites."
It appears Under Armour is making the most of the huge investments it made over the past two years in mobile connected fitness, notably including not only the development of its own namesake fitness apps, but also $150 million spent to acquire MapMyFitness in 2013, and $560 million to purchase both Endomondo and MyFitnessPal just over a year ago. As it stands, Under Armour now boasts a connected fitness community of well over 160 million registered users. That mobile traffic now represents the majority of U.S. website visits indicates that the company is effectively capitalizing on this captive consumer base.
5. Healthbox is a success
"In the connected fitness space, we saw strong activity on our website for the UA HealthBox launch, as it came in as our second best-selling item on e-commerce behind the Curry Two for the quarter. This great initial consumer reaction to a $400 connected fitness bundle and broader retail rollout through spring has us excited about the opportunities in connected fitness."
Finally, recall that at the 2016 Consumer Electronics Show in January, Under Armour introduced UA HealthBox, which includes a new smart fitness band, heart-rate monitor, and a smart scale. But with its seemingly steep $400 suggested retail price in mind, until now it was difficult to gauge consumers' early reactions to UA HealthBox. Perhaps it should come as no surprise, then, that on Monday Under Armour expanded its launch by making UA HealthBox available for pre-order in Canada. In the end, assuming Under Armour can continue translating the success of its Connected Fitness product portfolio to additional countries going forward, the new category should serve as a lucrative incremental revenue source as Under Armour steadily expands its global presence.