Athletic apparel and equipment maker Under Armour (NYSE:UA) announced a major milestone during its fourth quarter/fiscal 2010 earnings release, with the company reaching the $1 billion in annual revenues for the first time. The ever-growing apparel firm has seen its strategy of adding additional product lines to its core anti-moisture apparel pay off in spades thus far and management is hoping that their new sponsorship deals with celebrity athletes along with a move away from its "hard-core sport" image will drive growth in 2011.

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UA's Billion-Dollar Year
For the fourth quarter Under Armour reported sales of $301.1 million, up 36% from the $222.2 million reported in Q4 2009, and well above the $272 million expected by analysts. On the earnings side, numbers were equally as impressive with net income rising 51% to $22.9 million (44 cents per share), from $15.2 million (30 cents per share) in 2009. Additionally, gross margin rose 50 basis points to 51.7%, compared to 51.2% last year. The margin boost was a key sign for investors that Under Armour is able to manage its sales and product growth while maintaining (and even increasing) margins.

For full-year figures, as previously mentioned, Under Armour had its first $1 billion year, with annual revenues totaling $1.06 billion. With last year's sales coming in at $856 million, the 24% year-over-year improvement is a clear sign that the company's growth is for real. Earnings rose 46% to $68.4 million ($1.34 per share), compared to 446.7 million (92 cents per share) last year.

New Products and the Future
CEO Kevin Plank also introduced what he hopes will lead UA's growth in the next couple of years, "Charged Cotton." The new product, which should hit shelves in February, will combine Under Armour's familiar performance synthetics with cotton. Plank told analysts during the call that teens typically have around 26 cotton shirts in their wardrobe, compared to only five or six that would fit under the "performance" category. Management is hoping that by offering the new product at a fair price (reportedly about $25), Under Armour can grow revenues by picking up some market share in the huge cotton apparel marketplace. While time will tell whether or not this is true, it's a safe bet that they will gain some traction with casual athletes and the general fitness population.

Plank also spoke with a lot of pride when he spoke about equipping this year's NCAA BCS champion Auburn Tigers. The Under Armour Logo couldn't be missed this college football season, and went head-to-head with rival Nike's (NYSE:NKE) home state Oregon Ducks in the BCS Championship game, coming out on top on the scoreboard in a last second thriller. In addition to the company's NCAA footprint, it also has steadily added to its sponsorship resume in the pro ranks as well, most notably with the recent signing of Patriots QB Tom Brady, who will don Under Armour apparel for training and a new line of customized cleats for games. Additionally, the basketball shoe segment shows good growth potential, accounting for just under $22 million in sales for the fourth quarter, an increase of 152% from the prior year. Management expects the basketball shoe segment to perform well over the next few years as awareness of the brand on the court grows.

Bottom Line
Under Armour has done a great job in catering to the performance athletes with its trademark moisture-wicking materials, building a loyal customer base in the process. Now management is looking to steal some more market share from big name rivals Nike and Adidas (OTC:ADDYY) in the casual sportswear arena. Under Armour's new cotton blends should help drive the top line for 2011 and perhaps lead to new product lines down the line. (To learn more, see Analyzing Retail Stocks.)

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Tickers in this Article: UA, NKE, OTC:ADDYY

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