Under Armour Earnings Preview

Athletic apparel company Under Armour (NYS: UA) reports earnings results Friday, and I couldn't be more excited. This is a company I have been following for some time, and there is a lot to like about the company. I personally like the way President and CEO Kevin Plank is compensated based on the performance of the company he founded.

Last year was a record year for the apparel company, with revenue close to $1.5 billion. While this pales in comparison to chief competitor Nike (NYS: NKE) , it marked the seventh consecutive year of revenue growth for Under Armour as a public company. The first quarter of 2012 should be a good indicator of the direction the company will be heading this year. Analysts are expecting revenues of $379.8 million for the quarter, equating to $0.24 per share.

What to look for
Under Armour is still trying to gain a foothold -- pun intended -- in the lucrative athletic shoe market. Last year, footwear revenues grew 42% over the previous year, but still only account for 12.3% of total revenue for the company. As a comparison, Nike, which is primarily a footwear company, generates 27.8% of its revenue from the sale of apparel. If Under Armour could reach that level with its footwear, it might finally begin to give Nike a run for its money.

When discussing Under Armour, we would be remiss if we didn't tackle the inventory issues that have seemed to plague the company for almost a year. Last year, inventory growth outpaced revenue growth by nearly 13%. This quarter might not be much better, as a milder winter in most of the country may result in retail partners such as Dick's Sporting Goods holding onto Under Armour's famous cold weather gear into the spring, which could lead to the return of overstock later in the year.

Only time will tell
Plank himself has taken a long view on his company, with ultimate goals of unseating Nike from its perch as No. 1. If he is able to eventually succeed, it would probably be one of the greatest stories in modern business. In the meantime, I hope Under Armour can continue its massive growth as it becomes an even bigger player in the athletic apparel arena. Keep an eye on the developments with this company by adding them to My Watchlist today. You can start now by using the links below. Enjoy, and Fool on!

At the time thisarticle was published Fool contributor Robert Eberhard owns plenty of Under Armour gear, but holds no position in any company mentioned. Follow him on Twitter. The Motley Fool owns shares of Dick's Sporting Goods and Under Armour. Motley Fool newsletter services have recommended buying shares of Under Armour and Nike, as well as creating a diagonal call position in Nike. The Motley Fool has a disclosure policy.
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