Investors have been treating Under Armour
After reporting 28% improvement in earnings, UA shares leapt an astonishing 26% in a single day. And for this, you've got to credit the company's ability to maintain strong margins on its goods. With the gross rising to 51% last quarter, UA's leaving Deckers Outdoor
Trusted, verified, and ready to run
Last quarter, I gave credit where it was due: to UA management, for making a good start on its promise to pare inventory growth until it's "growing in line with net revenues." In Q3, they completed the job. With sales up 24% year over year in Q3, inventories grew just 8%.
What's more, as COO Wayne Marino noted, ever since poaching David McCreight from Sears Holdings
Why that's important
At last report, UA was still running to the negative on free cash flow -- not the best place to be in the middle of a recession. Now that it's tying up less cash in unsold inventories, I hope we'll see cash profitability change for the better.
Speaking of which, if I've a quibble to make here, that's it -- the fact that we can only "hope" for good news on cash flow. Fools know that a perfect earnings report shows you the money. So ideally, we would all be able to see this for ourselves in a cash flow statement -- but UA continues to withhold this essential document.
Still, after reading those numbers that UA did deign to reveal yesterday, I'm a lot more comfortable trusting UA on this point today.
Columbia Sportswear is a Motley Fool Hidden Gems selection. Sears Holdings is a Motley Fool Inside Value pick. Under Armour is both a Motley Fool Rule Breakers recommendation and a Hidden Gems pick, and The Fool owns shares of Under Armour in its own right. The Fool has a disclosure policy.