Another Quarter, Another Earnings Beat

Under Armour (NYS: UA) reported earnings for its fourth quarter this morning, with overall net revenue up 34% for the quarter and 38% for the year, and beating estimates by $0.02 per share. Nevertheless, perhaps scared by stagnant gross margins, investors are driving the stock down this morning, which is down nearly 6% off yesterday's close.

What I was watching
As I outlined earlier this week, there were two things I was watching in particular for the company. The first was inventory growth over the previous year. Under Armour is often compared to competitor lululemon athletic (NAS: LULU) for at least one reason: both receive a lot of grief for inventory levels. Investors and analysts alike want to see inventory and revenue grow in tandem. Under Armour CEO Kevin Plank has made it a goal to bring these numbers closer together, and the company closed the gap in the fourth quarter, with inventory growing 51% at year-end over last year, while revenue was up 38%.

The other thing I was looking for was growth in Under Armour's footwear segment. Nike (NYS: NKE) has continually dominated the footwear market, with market share in excess of 90%. Nevertheless, Under Armour footwear revenue was up 43% for the year. With basketball season in full swing, and with numerous young basketball stars wearing the company's shoes, the segment should see continued growth ahead.

What I like going forward
Under Armour is at its core an apparel company. I was pleased to see continued growth in the apparel segment, as well as the company earning more revenue in apparel in 2011 than did the entire company in 2010. And since it lacks a major retail presence like lululemon, the fact that its direct to consumer revenue grew 62% over last year is also reason to celebrate.

This bodes well for the future because any growth in apparel and accessories can be considered gravy to apparel's mashed potatoes. Even though Under Armour doesn't own patents on the clothes it sells, it has brand strength and partnerships with national retailers like Dick's Sporting Goods (NYS: DKS) , whose Under Armour "store within a store" concept drives traffic to the brand.

What it all means
Under Armour has been able to grow at double digits for over a year now. While this is something I don't expect to happen forever, it is something that I see continuing for at least the next year. In fact, after writing about the company so much over the past six months, I am even going to add it to my portfolio when I am able. Feel free to add Under Armour to My Watchlist, or get a copy of our new free report "3 American Companies Set to Dominate the World" to see if it made the cut.

At the time thisarticle was published Foolish contributorRobert Eberhardowns articles of Under Armour clothing but no shares in the companies mentioned here. Follow him on Twitter, where he goes by@GuruEbby. The Motley Fool owns shares of Dick's Sporting Goods, lululemon athletica, and Under Armour.Motley Fool newsletter serviceshave recommended buying shares of Nike, Under Armour and lululemon athletica; and creating a diagonal call position in Nike. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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