Under Armour (NYS: UA) reported earnings for its second quarter this morning, reporting that overall net revenue rose 27%, to $369 million from the same quarter last year. Net income was also up 7% from last year, trailing revenue growth because of a shift of marketing expenses into the second quarter, and earnings per share checked in at $0.06, a 6% increase. With the company further raising revenue and income guidance for the year, the stock was up as much as 13% this morning.

What I was watching
Footwear revenue continues to grow, increasing 44% from the previous quarter, and represented 18% of all revenues for the quarter. This growth was primarily due to the launch of new running styles, including the UA Spine, which saw a cleated version debut recently at the MLB All-Star Game.

It only represents one quarter, but this is one area that will help Under Armour, which is primarily an apparel company, compete better with Nike (NYS: NKE) , which is known more as a shoe company. If the footwear segment continues to grow faster than the apparel segment, Under Armour will soon be a major player in athletic footwear.


As with nearly every other quarter, it is important to keep an eye on inventory growth. Second-quarter inventory rose 22% relative to the same quarter last year. Nevertheless, this is the first quarter that I can remember seeing revenue growth outpace inventory growth, which could bode well for the future.

What I like going forward
Under Armour continues the expansion of its business beyond its performance athletic wear. It continues to tout the performance of new products, including its Studio brand for women. This brand looks to compete directly with the offerings of lululemon athletica (NAS: LULU) , providing yoga and other fitness apparel for women. Furthermore, in addition to the Spine running shoe, Under Armour hopes to maintain its upward momentum in footwear with the Highlight football cleat, which will be worn by football star Cam Newton and is featured prominently in recent advertising.

Direct-to-consumer revenue is also important for Under Armour. Without a major retail presence like lululemon, Under Armour relies on retail partners like Dick's Sporting Goods to sell its products. Nevertheless, its direct-to-consumer revenue represented 29% of total revenues for the quarter, with year-over-year growth of 35%.

Finally, further growth overseas will only help Under Armour perform better, and with only 6% of revenues currently derived from overseas, there is plenty of room for growth. An agreement with Tottenham in the English Premier League gives the company a presence in one of the most popular leagues in the world, which could bode well for future growth in Europe and beyond.

What it all means
All the great news out of Under Armour prompted an increase to its guidance for the year, and it now expects revenue for the year to be around $1.8 billion, an increase of 22% over last year. With its recent 2-for-1 stock split, even more people could be considering investing in the company, making it a prime candidate to return to its pre-split prices within the next few years, but only if it continues on its current trajectory.

To keep an eye on the continued growth of this exciting company, feel free to add it to My Watchlist. You can also see whether its recent foray into the English Premier League was enough for it to earn a place in our free report "3 American Companies Set to Dominate the World." Get this great report before it's too late.

The article Another Quarter, Another Earnings Beat originally appeared on Fool.com.

Fool contributor Robert Eberhard owns numerous articles of Under Armour clothing but holds no position in any company mentioned. Follow him on Twitter, or check out his holdings and a short bio. The Motley Fool owns shares of Under Armour, Dick's Sporting Goods, and lululemon athletica. Motley Fool newsletter services have recommended buying shares of Under Armour, Nike, and lululemon athletica, creating a bear put spread position in Under Armour, and creating a diagonal call position in Nike. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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