Under Armour (UA)

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Under Armour (UA)

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Research
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Under Armour (UA)
July 17, 2013
Initiating Coverage with an OUTPERFORM rating and $70
Target; Multiple Growth Drivers Support Premium Valuation
• We are initiating coverage of shares of UA with an OUTPERFORM rating and
a $70 price target. We find multiple growth drivers to support the premium
valuation with women’s, youth, footwear and international continuing to represent
UA’s most significant wholesale opportunities, while continued growth of direct-toconsumer operations should continue to benefit gross margins and drive further
brand awareness. Strong management leadership, continued product innovation,
creative marketing, key infrastructure investments and solid balance sheet also
support our positive outlook for the shares.
• Growth initiatives through 2016 achievable, in our view. Management held an
Investor Day in June and highlighted its strategic plans through 2014. UA is
targeting $4 billion in revenues by 2016 and, given premium valuation, nearflawless execution of these initiatives will be critical for continued share price
outperformance. We believe the current athletic landscape will continue to benefit
from favorable secular trends and we continue to expect further market share gains
for UA.
• We expect modest upside for 2Q and see minimal risk to 2013 earnings.
Given the recent analyst meeting and reiteration of 2013 guidance, we currently
expect $0.01 upside to upcoming 2Q earnings, though we initiate with nearconsensus expectations for the remainder of the year. We expect modest upside to
our 2014 estimate relative to consensus estimates.
• Longer-term, we see a path towards $5 billion in revenue. We believe that UA
can ultimately replicate its North American market share (approximately 5%) on a
global basis, which would imply roughly $5 billion in total revenues, which we
believe could be achieved by fiscal 2017. Assuming a flattish gross margin
structure (as we expect product mix shifts to be offset by channel shifts and
potentially aided by modest increases in price points) and modest SG&A leverage
beyond 2016, we derive our earnings power assumption of ~$3.50.
Footwear, Apparel and Accessories
• Though valuation remains rich, we believe the premium is justified and we
initiate with a 12-month price target of $70. Despite the company’s premium
multiple, lack of near-term catalyst and a changing risk/reward position given the
push towards more international exposure (in our view the biggest risk,) we believe
continued near-term execution will fuel both top and bottom-line momentum.
FYE Dec
2012A
REV (M)
ACTUAL
CURR.
PREV.
2013E
CONS.
CURR.
PREV.
CONS.
Q1 Mar
Q2 Jun
Q3 Sep
Q4 Dec
Year*
Change
$384.4A
369.5A
575.2A
505.9A
$1,834.9A
24.6%
$471.6A
456.1E
706.9E
612.2E
$2,246.8E
22.4%
------
467.8A
448.8E
709.0E
614.0E
$2,244.9E
$573.1E
555.0E
855.0E
739.0E
$2,722.1E
21.2%
------
$570.6E
541.3E
847.2E
733.2E
$2,709.4E
ACTUAL
CURR.
PREV.
CONS.
CURR.
PREV.
CONS.
$0.14A
0.06A
0.54A
0.47A
$1.21A
49.9x
30.8%
$0.07A
0.15E
0.70E
0.58E
$1.50E
40.2x
24.6%
------
0.03A
0.14E
0.70E
0.55E
$1.47E
$0.12E
0.18E
0.84E
0.70E
$1.85E
32.6x
22.9%
------
$0.12E
0.18E
0.84E
0.68E
$1.83E
2012A
EPS
Q1 Mar
Q2 Jun
Q3 Sep
Q4 Dec
Year*
P/E
Change
Price
$60.35
Rating
OUTPERFORM
12-Month Price Target
$70
Corinna Freedman
(212) 668-9876
corinna.freedman@wedbush.com
Company Information
Shares Outst (M)
Market Cap (B)
52-Wk Range
Book Value/sh
Cash/sh
Enterprise Value (B)
LT Debt/Cap %
105.1
$6.3
$44.32 - $65.55
$10.03
$3.04
$6,192.8
6%
Company Description
Under Armour is a leading athletic brand
that designs, develops, markets, and
distributes premium priced performance
apparel, footwear, and accessories for men,
women, and youth globally. Primarily a
wholesaler, UA also operates ~110 stores
and an e-commerce site.
2014E
2013E
2014E
Source: Thomson Reuters
Consensus estimates are from Thomson First Call.
* Numbers may not add up due to rounding.
Wedbush Securities does and seeks to do business with companies covered in its research reports. Thus, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors
should consider this report as only a single factor in making their investment decision. Please see page 23 of this
report for analyst certification and important disclosure information.
Initiating Coverage on UA with an OUTPERFORM Rating and $70 Target.......................................................................................... 3
Background Information ...................................................................................................................................................................... 3
Investment Thesis – No Longer The Underdog ................................................................................................................................. 6
1. APPAREL OPPORTUNITIES REMAIN – Strengthening the Core ............................................................................................................... 6
2. INTERNATIONAL GROWTH – Stretching First....................................................................................................................................... 7
3. FOOTWEAR – No Pain, No Gain........................................................................................................................................................... 8
4. DISTRIBUTION – Bulking Up in Direct-To-Consumer.............................................................................................................................. 9
5. PROTECTING THE HOUSE – New Discipline......................................................................................................................................... 11
6. INNOVATION – Necessary To Combat Commoditization .................................................................................................................... 12
Investment Risks / Concerns............................................................................................................................................................. 13
Financial Overview ............................................................................................................................................................................. 14
Valuation — $70 Blended Price Target ............................................................................................................................................. 14
Financial Models................................................................................................................................................................................. 17
Corinna Freedman (212) 668-9876
Under Armour Inc. | 2
Initiating Coverage on UA with an OUTPERFORM Rating and $70 Target
We are initiating coverage on shares of leading athletic footwear and apparel manufacturer Under Armour Inc. (UA) with an
OUTPERFORM rating and a $70 12-month price target. We find multiple compelling growth drivers to support the current premium
valuation for the company with women’s, youth, footwear and international continuing to represent UA’s most significant wholesale
opportunities, while continued expansion of direct-to-consumer operations should continue to benefit gross margins and drive further
brand awareness. Strong management leadership, continued product innovation, creative marketing, key infrastructure investments
and solid balance sheet also support our positive outlook for the shares. Despite the company’s lofty multiple (due in part to the
market’s current lack of public mid-cap growth companies), current lack of catalysts (given the recent analyst meeting) and changing
risk/reward position given the push towards more International exposure, we are positive on the shares and the company’s growth
trajectory. We have confidence in the company’s medium-term outlook (through 2016) and we believe the leverage implied in the
recently updated long-term goals may be somewhat understated. Though we caution that near-flawless execution will be required for
continued support of the company’s premium multiple and this could be difficult given new hires and evolving business model, we are
nevertheless encouraged by the company’s rational and realistic growth goals. Over the longer-term, we believe UA has the potential to
be a $5 billion brand as we believe that UA can ultimately replicate its North American market share (approximately 5%) on a global
basis, which we believe could be achieved as early as fiscal 2017.
Figure 1: Under Armour Brand Fall Marketing, Select Product Images and Logo
Source: Company data, Wedbush Securities, Inc.
Background Information
Company Description.
Under Armour, headquartered in Baltimore, Maryland, is a leading manufacturer of premium-priced
innovative performance athletic apparel, footwear and equipment and was founded by current CEO Kevin Plank in 1996. UA went
public in late 2005 and since its IPO, UA has grown revenues approximately 31% on a compound annual growth basis through 2012.
Today, the $6.4 billion market-cap company primarily operates in the domestic North American market (94% of revenues in 2012) with
a small international presence distributed in over 30 countries. The company’s Japanese business, its most mature international
market, is currently operated as a license with Dome Corporation and UA currently generates $200 million in wholesale sales in the
country, up 30% versus last year. Under Armour also operates an e-commerce site and approximately 110 stores (consisting primarily
of outlet stores) as the bulk of its distribution is currently to wholesale customers, particularly Sporting Goods chains. UA opened its first
full-price store in 2008, however, the assortment breadth and brand awareness were not enough to support a national rollout.
Management returned to the full-price strategy in 2012 and opened its first full-price Brand House in Maryland with a second test
location to be opened in Tyson’s Corner, Virginia.
Figure 2: 2012 UA Revenues By Segment
Figure 3: 2012 UA Revenues By Region
Source: Company data.
Product and Merchandising.
Since 2005, UA has evolved from a single product line manufacturer of moisture wicking
compression tops to a more diversified company focused on the design, development, marketing and direct sales of athletic apparel,
footwear, and equipment with a broad array of products. Women’s and Kids’ apparel lines were launched in 2003 and 2004,
respectively. Having famously declared cotton as the company’s “enemy,” UA would later acquiesce that cotton was not its customer’s
enemy and UA’s apparel product assortment has since grown to include “Charged Cotton” and a range of other performance materials.
In 2006, the company entered into the footwear segment with the introduction of its performance cleats. Similar to its ability to
significantly grow the compression category, UA invigorated the sleepy cleats category with more style and performance features
relative to its competition. Currently, UA commands a 30% market share of this category. This expertise has in turn allowed the
company to enter into the performance footwear category as its first model, a cross-trainer, was introduced in 2008. After a lukewarm
reception and some pricing issues, the company spent more time developing its next footwear offerings and today, the footwear
category currently represents 13% of the assortment. Moisture wicking apparel represented 64% of the apparel assortment in 2005 and
is now just 14% of the apparel assortment today.
Figure 4: 2012 UA Revenues By Merchandise Category
Figure 5: 2012 UA Revenues By Distribution
Industry Positioning. For 2012, we assume that the entire global athletic market was roughly $175 billion in wholesale dollars of
which $75 billion is athletic apparel and $50 billion is athletic footwear, with hardgoods and accessories comprising the remaining $50
billion. We estimate that UA currently has a 2% global market share of the apparel market and slightly less than 1% market share of the
global athletic footwear market. If we apply UA’s estimate that North America represents a third of the global market, this would imply a
5% market share in apparel and less than 2% market share in footwear in wholesale dollars in North America. Demographically, we
believe the brand is favorably positioned and will likely continue to benefit from the secular trend towards healthy living as the athletic
sector has been outperforming the overall apparel and footwear industries.
Figure 6: Global Market Share – Athletic Apparel 2012E
Figure 7: Global Market Share – Footwear 2012
Marketing – Dwarfed By Competitors.
UA’s marketing spend is relatively dwarfed by its more well-known global
competitors such as Nike and Adidas, which puts it at a temporary disadvantage for international expansion. This has required UA to be
more creative and strategic with its investments. Original marketing for the brand was very differentiated and utilized college athletes
and rookies and the company eventually began to participate in a pro-athlete paid sponsorship approach. UA targets both younger
athletes across a wide variety of sports that are earlier in their careers, such as Lindsay Vonn, Cam Newton and Bryce Harper, as well
as accomplished athletes such as Michael Phelps, Ray Lewis and Tom Brady.
Figure 8: UA Marketing Spend vs. Competitors - 2012
Figure 9: Tottenham Hotspur Sponsorship
UA is no stranger to team sponsorships having outfitted nearly 60 college teams, and the company recently ventured into professional
team sponsorship by outfitting the jerseys for the English Premier League’s Tottenham Hotspur, which should help drive international
brand awareness, build the company’s expertise in soccer and lay the marketing groundwork for the 2014 World Cup in Brazil. Further,
UA will also be outfitting several Olympic teams in both upcoming Winter and Summer Games. Most notably, UA signed an 8-year deal
to outfit the USA Gymnastics teams, which we believe will support a continued push for the women’s business given the elevated
media attention the women’s team typically receives.
Investment Thesis – No Longer the Underdog
1. APPAREL OPPORTUNITIES REMAIN – Strengthening the Core
New Infrastructure, Broader Reach and Continued Innovation to Support Apparel Growth. Growth of the
core apparel business will continue to be driven by greater brand awareness and continued distribution growth, as well as via continued
innovation and expansion of current product platforms (such as the Charged Cotton, ColdBlack or Storm Armour Fleece product lines)
and the introduction of new platforms (such as the new ColdGear Infrared). Management has indicated a strong product pipeline and
we expect apparel to continue to represent the largest percentage of the assortment through 2016, though we expect it to be a
declining percentage versus 2012. UA will launch four new categories this year, running, golf, underwear and outerwear. We also
believe that UA can grow its core customer base with more casual looks or lifestyle product in technical-inspired sportswear and we
expect the company’s new design office located in NYC to benefit the company’s ability to attract design talent. We believe that
management can continue to grow the wholesale apparel businesses both domestically and internationally and we see no reason why
UA would not be able to replicate its domestic men’s market share in other customer segments. We expect men’s apparel to represent
a diminishing percentage of the overall assortment as the company ramps its exposure to women’s, youth and footwear.
Figure 10: Men’s Apparel Sales As % of Total Sales
Figure 11: Branded Product Platforms
Women’s and Kids’ Opportunities Significant. We estimate that the global women’s athletic apparel market represents
roughly $25 billion in wholesale dollars, however, we believe UA’s addressable market is significantly larger as more women’s casual
looks default to athletic or athletic-inspired apparel. In the U.S., women’s athletic apparel represents $8.3 billion in wholesale dollars
and we estimate that UA currently has a 5% market share with $407 million in revenues at the end of 2012. We estimate the women’s
business will grow 21% in 2013 supported by the doubling of UA’s female-focused marketing relative to last year and the segment will
likely surpass management’s $960 million goal by 2016, by our estimates, more than doubling relative to the $407 million achieved in
2012.
Our current outlook for expansion of UA’s Women’s segment has grown more favorable given the current industry backdrop and after
viewing the assortment at the company’s recent Investor Day. We see increased distribution of women’s athletic apparel in the
wholesale channel given the superior growth and relative strength of competitors such as Lululemon and Athleta. Relative to LULU, we
believe the company’s recent quality control stumbles could be significantly detrimental to the company’s premium price positioning.
Further, we believe the yoga trend has plateaued as evidenced by LULU’s expansion into additional sports categories and, as a result,
we believe yoga-centric competitors could lose market share to UA. We believe that Under Armour is particularly well-positioned to
capitalize in the current market as the assortment is priced somewhat lower than LULU and its market positioning caters to a more
serious athlete. We also continue to assume that Nike maintains its position, with share gains likely from smaller competitors. Further,
we believe that the company’s current distribution favors an older customer and the company’s penetration into more metropolitan
areas coupled with more targeted marketing should improve the company’s positioning with younger female customers.
Figure 12: Women’s Apparel Sales as % of Total Sales
Figure 13: Women’s Product Marketing
Source: underarmour.com
Source: underarmour.com
We believe that the UA brand further differentiates itself from competitors with a strong youth presence, which is likely due to a strong
assortment of team sports apparel. Internally, this customer cohort is named “Next” as the company aims to grow its appeal with the
next generation of athletes. We estimate that the global market for branded youth athletic apparel is significant and represents
approximately 15% of the total global athletic apparel market or approximately $11 billion globally and $4 billion in wholesale dollars in
the U.S. The market for youth athletic apparel is much more fragmented as parents focus more on price and value, which provides an
entry for lower-cost competitors. We believe there is a market for Under Armour’s kids’ performance apparel as demonstrated by UA’s
March launch of its Alter Ego line (compression tops printed with superhero graphics), which was the fastest selling item on its ecommerce site during the quarter. By 2016, we estimate kids’ apparel will generate an additional $300 million in sales and grow to
represent 12% of total revenues.
Figure 14: Youth Apparel Sales as % of Total Sales
Figure 15: Alter Ego for Kids
Source: Sportscan, Wedbush Securities, Inc.
Source: Company presentation
2. INTERNATIONAL GROWTH – Stretching First
Primary Driver of Premium Multiple. In our view, the primary reason UA is trading at a significant premium to the group
(apart from the scarcity of mid-cap Consumer growth companies) is due to the open runway for growth in its International segment.
Representing just 6% of revenues today, UA is projecting volumes to double by 2016. With several key new hires in place, continued
investments including new regional offices and new international marketing initiatives, management has laid the groundwork for this
segment to be a meaningful contributor and will continue to invest significantly in this area. We do not expect the international division
to start to kick off leverage until 2015.
Figure 16: International Revenues as % of Total
Figure 17: UA’s International Strategy By Country
Source: Company presentation
Organizationally, the company has divided its international operations into four regions, led by new hire and International President
Charlie Maurath who joined the company in September 2012 from Adidas, where he was Senior Vice President in charge of Latin
America and grew that business from 150 million euros to 1.7 billion euros. UA is wisely using a combination of strategies including
direct operations, distributors and licensing operations (though Japan is currently the only market to date.) Management indicated it
would focus on opening 10 new international offices, while offices in Panama (opened in May,) Manchester, Australia and Germany will
be open by the end of the year. We believe the company’s biggest international opportunity in the near term will be Latin America,
followed by Western Europe. China may ultimately prove to be a tougher market for UA to crack given the company’s performance
positioning, China’s lack of professional team sports and the current struggles of larger competitors.
3. FOOTWEAR – No Pain, No Gain
Previous Stops & Starts, But Now Pacing For Measured Growth.
UA’s expertise and dominance in the cleated
footwear category (launched in 2006 and now garnering an approximate 30% market share) allowed the company entry into the
performance footwear category in 2008. Its first model, a cross-trainer (introduced in 2008,) received a lukewarm market reception,
despite being supported by a Super Bowl commercial, which we believe was likely due to pricing issues. In our view, the brand was not
likely at the level of market awareness to support such an ambitious launch. The company then re-tooled its strategy, hired Gene
McCarthy from Timberland (and previously with Reebok and Nike,) and spent more time developing its strategy. Though UA had
previously launched a running product in 2009, management re-launched the running category in 2012 with the larger introduction of
the Spine running shoe, which tapped into the lightweight running popularity and added a technical twist. Most recently, UA has
launched its latest running platform, Speedform, for fall 2013, which is a seamless lightweight style with a unique manufacturing story
having been produced in a “bra factory.” Speedform is at a higher retail price point relative to previous running launches.
Figure 18: Spine Venom ($90 ) and Spine Storm ($90)
Figure 19: Speedform ($120)
Footwear represented 13% of the assortment at the end of 2012 and we estimate the category will grow 29% in fiscal 2013 to 13.7% of
sales. We are optimistic that new talent, the new design office in Portland and the heightened focus on innovation and style which will
command slightly higher prices and will ultimately drive the category to a penetration that is higher than management’s 15% of sales
growth target. We currently model footwear to represent 17% of the assortment in 2016, ahead of management’s plan as we anticipate
management to make a bigger splash in the basketball category, which will likely be at higher ASPs relative to the running category.
While the footwear category overall is currently margin dilutive due to lower product margins relative to apparel and mix as UA is overindexed to the cleated category (the lowest-margin footwear segment.) Running margins are slightly better than cleated margins and as
the company ramps up volume in non-cleated, we expect modest leverage, however, we acknowledge that this is a structural long-term
impediment to gross margins.
Figure 20: US Athletic Footwear Market By Sport
Figure 21: Footwear Sales As % of Total Sales
Source: Company presentation.
Under Armour continues to makes strides in sell-throughs of its current footwear assortment. According to Sportscan data (weekly point
of sale data by brand,) Under Armour footwear sales are up 57.5% year-to-date with a 16.6% increase in ASPs, which corresponds to
market share growth of approximately 70 bps to 2.3% of total dollars versus last year at 1.3% of total dollars. However we note that the
data does not include UA’s largest customer, Dick’s Sporting Goods. This increase is the second highest footwear brand growth yearto-date versus 2012 behind Vans. We continue to expect that the company will continue to invest in marketing to drive brand and
product awareness in the footwear channel beyond 2016 and we believe our longer-term expectations for 3-4% global market share
against particularly dominant competitors is realistic and achievable and could imply roughly $1.7 billion in wholesale footwear sales by
2020, by our estimates.
4. DISTRIBUTION – Bulking Up in Direct-To-Consumer
Square Footage Expansion. At the end of 1Q13, UA’s direct-to-consumer segment is comprised of 109 retail stores (comprised
primarily of outlets with a small full-price presence with a handful of full-price Brand/Specialty Houses, such as a mountain store in
Colorado) and an e-commerce site. Management indicated that e-commerce represented approximately 9% of sales in 2012, which
implies that brick and mortar sales represented approximately 20% of 2012 revenues. Growth of the DTC channel will be driven by the
continued expansion of the Outlet footprint, both via new store growth and via square footage expansion of the existing footprint. With a
greater penetration of women’s, kids’ and footwear product, outlet stores will need increase their selling space by 20% to accommodate
the larger assortments. Additionally, stores will require larger stock rooms to be better positioned in the footwear category. Management
has indicated an initiative to increase the size of the existing store base via new stores with an additional 10 stores slated for opening
this year. This growth includes primarily outlet stores and 2 full-price 8,000 square foot Brand Houses, which remain in test mode. For
2013, our model assumes a 20% increase in brick and mortar sales, based on mid- to high-single-digit same-store sales, 11 net new
stores and a 28% increase in square footage. We do expect that sales per square foot will initially decline modestly (from our estimated
$733 for 2012) given the square footage expansion versus the previous smaller store format.
Figure 22: Distribution Breakdown – 2012A
Figure 23: Estimated Distribution in 2016E
Despite the brand’s solid market positioning, distribution is still severely lacking on the West Coast and in urban metropolitan areas as
growth has primarily been driven by the company’s dominance in the Sporting Goods channel, which typically serves a suburban
customer. According to the International Council of Shopping Centers there are over 350 outlet centers in North America, not including
the first traditional outlet centers opening in Canada this year. We believe that UA can still expand selectively in the outlet channel as
UA is currently located in a third of all outlet centers. Management indicated that a full-price retail rollout would not likely occur until
2016 and beyond as the company continues to optimize the new box and fine-tune its strategy. By 2016, we expect retail stores to
continue to comprise roughly 20% of revenues and we estimate approximately 170 stores will generate retail sales of roughly $780
million.
Figure 24: UA Stores By State
Figure 25: Retail Stores and Square Footage Growth
1
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Continued Strides in E-Commerce Positive for Gross Margins.
Management has indicated that e-commerce
revenues represented approximately 9% of sales in 2012 and using industry sources we believe that the segment has grown 35%
versus the previous year. For 2013, we assume that e-commerce will grow by 35%, which implies revenues of $222 million or
approximately 10% of sales. We expect the greater shift towards e-commerce will be driven in part by increased online marketing and
continued mobile growth. Management also indicated that it was achieving better conversion from the company’s improved website
which is now presenting better merchandising and product imagery. Longer-term, we assume that e-commerce will represent slightly
over 11% of revenues by fiscal 2016.
Wholesale Business Growth Via Additional Shop-in-Shops, Athletic Footwear Shops. UA was founded as a
wholesale manufacturer with sales primarily to school sports teams. In 2000, it sold its first order to Gaylan’s (which was acquired by
Dick’s Sporting Goods.) Today, DKS represents its largest customer at approximately 13% in 2012, by our estimates, with the Sports
Authority its second largest wholesale customer at approximately 9% of orders. We estimate that over a third of revenues are driven by
wholesale sales to the entire sporting goods channel. We believe continued growth of wholesale at existing customers will be driven by
continued rollout of shop-in-shops in existing doors (management expects to double the total amount of North American shop-in-shops
through 2016.) At the end of 2012, UA had 110 shop-in-shops at Dick’s and this year is expected to open an additional 130 All-America
shop-in-shops, which was increased from 70 shop-in-shop openings. We expect minimal new door growth in the wholesale channel,
which we believe will be limited to the company’s push into additional department stores aided in part by the Macy’s Finish Line roll out
as well as continued growth of additional doors of athletic footwear retailers such as Foot Locker and Finish Line as the footwear
assortment expands. We noted mannequins of head-to-toe Under Armour merchandising in several upgraded Finish Line stores. We
estimate that new UA athletic footwear launches were currently carried in approximately 10-15% of locations of major athletic footwear
chains and, while the U.S. brand is carried in approximately 35-40% of potential department store locations (with the majority of these
locations carrying just small assortments of basics including sports bras and underwear) though the department store channel
represents just 2% of wholesale sales by our estimates. We note that UA also recently rolled out its first international shop-in-shop at
Harrod’s department store in London.
Figure 26: Wholesale as a % of Total 2012 Revenues
Figure 27: Estimated Wholesale Customer Breakdown
2012 Es t Cu st o me r B r e a ko u t
$ vo l % o f Re v s
Dicks
$232
The Sports Authority
9%
$404
22%
Other Sporting Good Chains
257
14%
Outdoor Chains
202
11%
Athletic Footwear Chains
73
4%
Dept Stores
37
2%
569
31%
To p 2 Accts
Lar g e ch ai n s
Others (Specialty, Int'l Etc.)
To t a l Who l e sa l e
13%
172
279
15%
1, 252
68%
Macy’s/Finish Line Likely to Drive Women’s and Footwear Mindshare. We believe that the Under Armour brand
stands the most to gain from the Macy’s and Finish Line shop-in-shop rollout. We believe the department store athletic footwear
shopper will be a more casual consumer and not as technically savvy, which, in our view, will allow for a more competitive landscape
with category behemoths, Nike and Adidas. Further, we believe the consumer will likely skew more to female and older (likely with
children) and this initiative will significantly serve to grow brand and non-cleat product awareness among these two important
demographics. We also believe that the Macy’s shopper will likely utilize the loyalty program, discounts and other Macy’s incentives and
that pricing will be of paramount importance, which we believe puts UA’s assortment at a competitive advantage given its slight
discount to Nike. Initially, we believe that UA footwear styles represent less than 3% of the current assortment, however we believe that
the brand is likely to take additional market share from larger assortment presentations (such as Skechers and New Balance) as the
assortment evolves. We believe the brand has the potential to represent ~5-8% of the assortment, which would contribute ~$20 million
annually (in retail sales by our estimates) as the locations expand to all 450 locations and generate $250 million in annual sales by
2017. While this amount may seem modest, we believe that the introduction of athletic footwear in Macy’s will open the door for
increased athletic apparel in the stores, which we view as a much larger and more meaningful opportunity. While UA is currently carried
in approximately 300 Macy’s currently, we expect all 750 locations to eventually carry a larger assortment of athletic apparel (similar to
Nordstrom’s offering) and we believe that Under Armour is the best positioned brand to capture the largest share of this distribution,
particularly in women’s.
5. PROTECTING THE HOUSE – New Discipline
New Hires and Better Inventory Management.
Management turnover has been a significant headwind at UA and
remains a risk. However, we believe that UA now has a strong management bench to guide the company through the next stage of
growth. In 2012, UA made several key hires, notably beefing up leadership in the planning, allocation and sourcing functions, which we
believe will contribute to more disciplined operations including continued improvement in order fill rates and shorter lead times. Previous
company fumbles were due to supply chain inefficiencies and lack of inventory discipline. We believe that management has installed
better controls to manage these operations as demonstrated by the 40% reduction in SKUs and narrower spread between ending
inventory and expected sales growth (see Figure 30). To boot, management aims to continue to speed up the sourcing timeline with
investments in technology which will continue to improve inventory turns (to levels closer to competitors) and ultimately be a tailwind for
gross margins. We note that management has guided to somewhat higher inventory levels for 2Q and 3Q due to the lapping of the
company’s supply chain issues last year.
Figure 28: UA Historical Inventory Turns
Figure 29: Inventory Turns Vs. Competitors - 2012
Figure 30: Spread of Ending Quarter Inventory-to-Next-Quarter-Sales (L) vs. Gross Margins (R)
6. INNOVATION – Necessary To Combat Commoditization
New Products and More Focus on Design. Under Armour’s legacy was built on innovation and we believe UA will need to
continue to innovate to maintain its premium pricing and performance positioning in the market, which should in turn help the company
compete against lower-cost competitors as well as larger complacent competitors. Management indicated that it has a stocked pipeline
of product innovation and that is attributable to the company’s cross-category “skunkworks” department focused on new product
development, led by COO Kip Fulks. UA’s biggest upcoming new product launch for fall 2013 is the ColdGear Infrared platform which
utilizes ceramic powder applied to fabric that allows body heat to be stored. The innovative fabric treatment will initially be incorporated
into an Outerwear line, the company’s first major push into the category. However, similar to previous platform launches, we believe the
process could be used for additional fabrications and product classifications. Management also launched ARMOUR39 earlier this year,
a product similar in concept to Nike’s Fuel Band, but closer in design to a heart rate monitor worn around the chest. UA’s product offers
more functionality than its competitors and is a biometric performance-monitoring system that allows athletes to measure and analyze
their workouts using heart rate, calorie intake, and workout intensity as well as a proprietary measure of willpower. We view this product
as a nice entry into the eventual trend towards wearable technology. Further, beyond product innovation, management has indicated
that it will continue to invest in design innovation, which we believe will be critical in driving the women’s business. In our view, superior
design was the primary reason that LULU was able to invigorate the yoga category as its heightened focus on fit and fashion was a
stark contrast from competitors’ “shrink it and Pink it” strategy. Management recently leased office space in Manhattan and also opened
a footwear design office in Portland, which we believe will aid the company in attracting and retaining better design talent.
Investment Risks / Concerns
Premium Valuation. Given the premium multiple, we believe the shares would be vulnerable in a market pullback or a sector
rotation out of Consumer Discretionary if investors become more valuation sensitive.
Key Man & Management Turnover Risk. Founder and CEO Kevin Plank is largely considered the driving force behind the
brand and integral to the company’s continued success. Additionally, he owns a significant portion of the outstanding shares (20%) as
of February 28, 2013. The loss of Mr. Plank would be significantly detrimental to the value of the shares. Management turnover would
also be disruptive and is a heightened risk given the relative newness of the management team and historical turnover.
Execution Risk. UA recently laid out a 3-year plan which highlighted multiple initiatives for growth and we believe the company’s
premium multiple depends on flawless execution against these plans. However, we do note that the company has surpassed its
previous long-term revenue plans. We believe that international expansion initiatives, given the company’s new offices and personnel
will likely be the most at risk strategy for execution stumbles.
Brand Risk.
Given the importance of marketing for the company, the UA brand is the company’s most valuable asset and any
scandals involving its paid athlete sponsors could damage the brand’s reputation. However, we note that UA’s largest competitor NKE,
has survived several major negative controversies involving its brand including the media’s accusation of using sweatshops and child
labor in its factories in the mid-1990s to the recent downfall of several major spokespersons.
Fashion Risk.
Consumer demand for athletic footwear and apparel is highly discretionary and subject to changes in consumer
preferences and confidence. Current fashion trends incorporate more technical aspects and embrace casual athletic-inspired looks and
we believe UA is currently benefitting from a very favorable fashion environment. However, should trends ever revert back to more
dressy, formal or polished casual looks, UA apparel sales could be impacted. Further, as UA injects more design innovation into its
assortment, fashion becomes more of a risk.
Weather Risk. Given the company’s heritage as a compression apparel manufacturer, shares of UA are sensitive to fluctuations in
winter weather as the product is generally layered. Sell-throughs of new product platforms such as ColdGear, ColdBlack and HeatGear
could be impacted by abnormal weather patterns. Further, a larger portion of the company’s annual sales occur in the 2H of the year at
approximately 60% of total sales and the company’s retail footprint is currently over-indexed to the weather-sensitive Northeast region
of the US at over 30% of current stores.
Fx/Macroeconomic Risk.
Though just 6% of UA’s revenues are generated overseas, results are subject to fluctuations in
foreign exchange, as well as geopolitical risk and additional macroeconomic pressures abroad. While the company employs hedging
instruments and forward contracts, the company is still subject to fluctuations in currency and macroeconomic pressures and sentiment.
Inputs/Commodities Risk. UA’s profitability is impacted by fluctuations in costs of raw materials, labor and freight. 14% of the
company’s revenues are derived from the synthetic performance apparel category (versus 64% in 2005,) which is impacted by
fluctuations in petroleum. However a greater portion of the assortment is comprised of cotton and other materials. For 2013,
commodities are down significantly versus last year and expectations remain favorable for the 1H of the year.
Intellectual Property Risk.
UA’s 10-K highlights that it does not currently own the patent or intellectual property rights to its
technology, fabrics and processes and as a result, competitors could replicate UA’s products and performance characteristics
potentially at lower prices.
Financial Overview
Cash Position. Under Armour currently has a healthy balance sheet with $342 million or cash per share of ~$3.20 as of the end of
2012 and ended the year with $53 million in long-term debt. We estimate 2013 ending cash of ~$3.70 per share, while our model also
currently forecasts modest free cash flow generation of $50 million for 2013 due to increased capital expenditures to fund infrastructure
investments. Inventory turns have steadily improved with new management since 2011 and achieved a turn 2.9x in 2012, while
management recently guided to inventory turns to 3.0x.
Earnings Outlook. We
believe that 2Q EPS will be a non-event given the company’s recent Investor Day in early June and
management’s reiteration of previous guidance. Our current EPS estimate is $0.01 above consensus driven by slightly higher gross
margin relative to consensus with SG&A leverage partially offset by a $5 million shift of marketing expense from 1Q into 2Q.
Management previously guided to a 2Q gross margin benefit of 100 bps in 2Q driven primarily by improving cotton prices. We currently
model 2Q gross margin expansion of 150 bps or roughly 40 bps ahead of consensus. Management previously cautioned that inventory
growth would outpace revenue growth in 2Q and 3Q due to last year’s supply chain issues, and ending 2013 levels would be only
modestly higher. We expect positive sell-in commentary regarding the company’s launch of outerwear, which we believe will contribute
to slightly higher average selling prices.
Figure 31: Revenue Bridge - 2012A to 2016E
Beyond 2016, we believe that UA could grow to a $5 billion brand, which would represent a 5% share of the global athletic market and
assuming a continued flattish gross margin structure (as we expect product mix shifts to be offset by channel shifts and potentially
aided by modest increases in price points) and incremental SG&A leverage, we arrive at our earnings power assumption of ~$3.50.
Valuation — $70 Blended Price Target
Valuation of Under Armour shares has recently been at a premium given favorable cyclical trends, UA’s relatively consistent operations
and earnings of late and continued overall strength of the market. Currently the shares are trading at 33x consensus 2014 EPS
estimate of $1.83 and at an EV/EBITDA multiple of 19.7x . This valuation is currently above UA’s 5-year historical average forward P/E
of ~31.0x and historical average EV/EBITDA of ~14.5x. However we note that most of our coverage universe is currently trading above
peak multiples. UA is also trading at a PEG of 1.6x 2013 growth and 1.3x 2014 growth, which we view as justified given the 23-25%
annual EPS growth expected through 2016.
Figure 32: 5Y Historical Forward P/E
Figure 33: 5Y Historical PE to Growth
Source: Thomson data, Wedbush Securities, Inc.
Source: Thomson data, Wedbush Securities, Inc.
$70 Blended Price Target.
We value shares of UA using a blended approach using a simple average of the price targets
derived from applying a forward P/E, EV/EBITDA, DCF methodology as well as a forward multiple applied to our longer-term earnings
estimate. We currently apply a 38x forward P/E (slightly above the company’s historical peak to justify our positive earnings
expectations and continued market strength) on our modestly higher-than-consensus 2014 EPS estimate of $1.85 (~23% EPS growth)
which yields a $70 target. We also apply a 22.0x EV/EBITDA multiple to our 2014 EBITDA estimate of $390 million which yields a price
target of $76. On an absolute basis, our DCF is based on a WACC of 10.2%, a takeout multiple of 15.0x and a beta of 1.27 which yields
a $64 price target. And finally, we model EPS of $3.50 per share in 2017 and applying a hypothetical normalized forward multiple of
20.0x implies a $70 target. The simple average of these four methodologies implies our blended target of $70.
Figure 34: Summary Valuation
Figure 35: UA – Summary DCF Analysis
2005
2006
2007
2008
2009
2010
2011
2012
2013E
2014E
2015E
2016E
2017E
$376
F REE C ASH F LOW
NET INCOME
$14
$39
$53
$38
$47
$68
$97
$129
$161
$200
$246
$306
INT EXPENSE * (1-TAX RATE)
0
0
0
0
0
(1)
(2)
(3)
(2)
(2)
(2)
(2)
(2)
DEPRECIATION
0
7
10
15
21
28
36
43
52
68
82
99
119
ADD BACKS:
EXTRAORDINARY LOSSES
5
0
0
0
0
0
0
0
0
0
0
0
0
5
7
10
15
21
27
34
40
50
66
80
97
117
INCR IN NET WORKING CAP
(15)
(37)
(83)
(10)
40
(59)
(146)
9
(101)
(81)
(100)
(100)
(100)
CAPITAL EXPENDITURES
11
15
34
39
20
30
79
51
85
100
100
100
100
TOTAL SUBTRACTIONS
(4)
(22)
(49)
29
60
(29)
(67)
60
(16)
19
0
0
0
TOTAL ADD BACKS
SUBTRACTIONS:
24
68
111
24
9
124
197
109
227
247
325
404
493
EBITD A ( SEE INC OM E STM T)
36
64
96
92
107
141
199
252
322
387
468
578
701
C ALC U LATION OF D ISC OU NT RATE
W ACC
a COST OF EQUITY
b COST OF DEBT
c WEIGHT OF EQUITY
CO ST O F EQ UITY
10.2%
0.0%
99.2%
d WEIGHT OF DEBT
0.8%
WACC (A*C+B*D)
10. 1%
C OS T O F DEBT
E RISK FREE RATE2
2.6%
i AFT-TAX INTEREST
0.1
j AVG TOTAL DEBT
-
F EQUITY BETA 1
1.27
G EQUITY MKT RISK PREM
6.0%
H POLITICAL RISK PREM
0.0%
COST OF DEBT (I/J)
F IRM VA LUE C ALC ULATION
DISCOU NT RA TE
F R EE CA SH F LOW TO F IRM
EV/EB ITDA E XIT M U LTIP LES
14. 5x
15. 0x
15. 5x
14. 0x
16. 0x
9. 1%
9. 6%
6,793
7,019
7,245
7,472
6,639
6,860
7,082
7,303
7,524
10. 1%
6,490
6,706
6,922
7,139
7,355
7,698
10. 6%
11. 1%
6,344
6,556
6,767
6,979
7,190
6,203
6,410
6,617
6,823
7,030
0
COST OF EQUITY (E+F*G+H)
10. 2%
BASED O N EV/ EBITDA TAKEO UT M ULTIPLE
1
Source: Factset
EQ UITY W EIG HTING
2
10Y Treasury
CURRENT PRICE
SHARES OUTSTANDING
EST FIRM VALUE 6,490
D EBT W EIGH TING
61.33
107.4
CURRENT MARKET CAP 6,587.9
TOTAL FIRM VALUE
6,640.7
EQUITY WEIGHTING
99. 2%
MKT VALUE OF LT DEBT
53
TOTAL FIRM VALUE
6,641
DEBT WEIGHTING
0. 8%
NET DEBT
6,706
6,922
7,139
7,355
53
53
53
53
53
MKT CAP
6,437
6,653
6,870
7,086
7,302
SHARE COUNT
107.4
107.4
107.4
107.4
107.4
EST PRICE/SHARE59. 93
61. 94
61.33
63. 95
61.33
65. 97
61.33
67. 98
61.33
1%
4%
8%
11%
CURRENT PRICE 61.33
-/+ POTENTIAL
-2%
Financial Models
Figure 36: Segment Data
R E VE NU E S B Y CA TEG ORY
Men's Apparel
Women's Apparel
Kid's Apparel
APPAREL
FOOTWEAR
ACCESSORIES
OTHER/LICENSING
TOTA L RE VE NU E S
R E VE NU E GROWTH B Y CA TE GORY
2005
2006
2007
2008
2009
2010
2011
189. 6
255. 68
348. 2
382. 1
418. 4
536. 7
669. 7
1Q12
2Q12
3Q12
803. 6
967. 9
53. 5
18. 8
85. 695
31. 8
115. 9
48. 6
140. 8
56. 0
168. 9
64. 5
227. 2
89. 5
319. 5
132. 8
407. 3
174. 5
494. 3
219. 7
578. 9
651. 8
853. 5
1, 122. 0
283.3
252.8
444.6
404.5
1, 385. 4
345.5
308.5
542.5
485.4
1, 681. 9
40. 9
29. 0
84. 8
31. 5
136. 2
35. 1
127. 2
43. 9
181. 7
132. 4
63.7
67.4
63.2
44.7
80.8
87.7
82.1
58.1
29.6
39.2
54.4
42.6
239. 0
165. 8
36.1
49.0
68.0
53.3
308. 7
206. 3
9. 8
15. 7
24. 0
30. 0
33. 3
39. 4
36. 6
7.8
10.0
13.0
14.0
44. 8
9.2
11.0
14.3
15.4
49. 9
281. 1
430. 7
606. 6
725. 2
856. 4
1, 063. 9
1, 472. 7
384.4
369.5
575.2
505.9
1, 834. 9
471.6
456.1
706.9
612.2
2, 246. 8
1Q12
2Q12
3Q12
4Q12
1Q13 2Q13E
3Q 13E
4Q13E
2008
2009
2010
2011
Women's Apparel
36%
35%
10%
21%
10%
20%
28%
35%
25%
41%
Kid's Apparel
48%
70%
53%
15%
15%
39%
48%
30%
43%
37%
13%
13%
31%
31%
23%
NM
25%
127%
NM
58%
61%
52%
95%
53%
108%
9%
- 7%
25%
18%
43%
202%
- 7%
24%
44%
26%
21%
25%
61%
11%
11%
7%
37%
25%
37%
53%
41%
20%
18%
24%
38%
23%
27%
24%
OTHER/LICENSING
R E VE NU E M I X B Y CA TE GORY
2013E
512. 6
2007
TOTA L RE VE NU E S
4Q13E
26. 9
14. 9
35%
60%
ACCESSORIES
3Q 13E
373. 2
2006
FOOTWEAR
1Q13 2Q13E
0. 0
9. 4
25%
87%
APPAREL
2012
261. 9
2005
Men's Apparel
4Q12
2012
20%
27%
20%
21%
31%
23%
2013E
26%
25%
23%
22%
22%
22%
20%
21%
21%
43%
30%
30%
30%
16%
22%
25%
25%
25%
29%
24%
21%
32%
25%
22%
27%
37%
19%
10%
10%
10%
12%
25%
25%
23%
23%
23%
21%
22%
1Q13 2Q13E
2013E
22%
2005
2006
2007
2008
2009
2010
2011
1Q12
2Q12
3Q12
4Q12
2012
3Q 13E
4Q13E
93. 2%
86. 7%
84. 5%
79. 8%
76. 1%
80. 2%
76. 2%
73.7%
68.4%
77.3%
80.0%
75. 5%
73.3%
67.6%
76.7%
79.3%
74. 9%
6. 2%
3. 5%
6. 7%
4. 8%
11. 7%
4. 3%
15. 9%
4. 1%
12. 0%
4. 1%
12. 3%
9. 0%
16.6%
18.2%
11.0%
8.8%
19.2%
11.6%
9.5%
7.7%
10.6%
9.5%
8.4%
13. 0%
9. 0%
17.1%
ACCESSORIES
0. 0%
3. 3%
7.7%
10.7%
9.6%
8.7%
13. 7%
9. 2%
OTHER/LICENSING
3. 5%
3. 6%
4. 0%
4. 1%
3. 9%
3. 7%
2. 5%
2.0%
2.7%
2.3%
2.8%
2. 4%
2.0%
2.4%
2.0%
2.5%
2. 2%
100. 0% 100. 0%
100. 0%
100. 0%
100. 0%
100.0%
100.0%
100.0%
100.0%
100. 0%
100.0%
100.0%
100.0%
100.0%
100. 0%
1Q13 2Q13E
APPAREL
FOOTWEAR
TOTA L RE VE NU E S
B Y DI STR IB U TI ON
Wholesale Sales
Retail Sales (Est.)
E-comm Sales (Est.)
Total Direct Sales
Liscensing Revenue
TOTA L RE VE NU E S
% mix Wholesale
% mix Retail (Est.)
% mix e-Comm (Est.)
% Total Direct
% mix Other
100. 0% 100. 0%
1Q12
2Q12
3Q12
4Q12
262. 9
8. 4
2005
393. 0
22. 0
537. 1
45. 5
608. 4
86. 9
684. 4
138. 7
781. 7
165. 9
1, 039. 3
274. 4
280.5
252.3
424.1
294.6
61.5
73.9
86.3
8. 5
12. 5
21. 3
35. 0
52. 9
77. 0
122. 4
34.6
33.3
51.8
16. 9
34. 5
66. 7
121. 9
191. 5
242. 9
396. 8
96.1
107.1
138.0
9. 8
289. 6
15. 7
443. 2
24. 0
627. 8
30. 0
760. 2
33. 3
909. 3
39. 4
1, 063. 9
36. 6
1, 472. 7
7.8
10.0
384.4
369.5
90. 8%
2. 9%
88. 7%
5. 0%
85. 5%
7. 2%
2. 9%
2. 8%
3. 4%
80. 0%
11. 4%
4. 6%
75. 3%
15. 2%
5. 8%
73. 5%
15. 6%
7. 2%
70. 6%
18. 6%
8. 3%
5. 8%
3. 4%
7. 8%
3. 5%
10. 6%
3. 8%
16. 0%
3. 9%
21. 1%
3. 7%
22. 8%
3. 7%
26. 9%
2. 5%
49%
163%
47%
37%
107%
70%
13%
91%
65%
12%
60%
51%
14%
20%
46%
33%
65%
59%
104%
61%
94%
53%
83%
25%
57%
11%
27%
18%
63%
- 7%
% growth Wholesale
% growth Retail (Est.)
% growth E-comm (Est.)
% growth Direct
% growth Other
B Y GE OGRA P HY
North America
International
2005
275. 6
2006
2006
420. 2
2007
2007
585. 8
2008
2008
692. 4
2009
2009
808. 0
2010
2010
997. 8
2011
2011
1, 384. 3
3Q 13E
4Q13E
339.8
312.9
514.5
360.0
151.8
1, 251. 6
373. 4
75.9
87.1
108.1
176.2
45.5
165. 1
46.7
45.2
70.0
60.6
222. 4
197.3
538. 6
122.6
132.3
178.1
236.8
669. 7
13.0
14.0
11.0
14.3
15.4
505.9
44. 8
1, 834. 9
9.2
575.2
471.6
456.1
706.9
612.2
49. 9
2, 246. 8
73.0%
68.3%
73.7%
58.2%
16.0%
20.0%
15.0%
30.0%
9.0%
9.0%
9.0%
9.0%
25.0%
29.0%
24.0%
39.0%
2.0%
2.7%
2.3%
2.8%
15%
23%
20%
24%
68%
36%
35%
27%
33%
37%
34%
36%
54%
36%
35%
29%
7%
37%
25%
21%
1Q12
2Q12
3Q12
4Q12
362.5
348.9
543.1
472.2
2012
68. 2%
20. 4%
9. 0%
29. 4%
2. 4%
20%
36%
35%
36%
22%
2012
1, 726. 7
72.0%
68.6%
72.8%
58.8%
16.1%
19.1%
15.3%
28.8%
9.9%
9.9%
9.9%
9.9%
26.0%
29.0%
25.2%
38.7%
2.0%
2.4%
2.0%
2.5%
21%
24%
21%
22%
23%
18%
25%
16%
35%
36%
35%
33%
28%
23%
29%
20%
19%
10%
10%
10%
1Q13 2Q13E
3Q 13E
4Q13E
660.9
575.5
440.9
427.6
2013E
1, 527. 2
447. 3
68. 0%
19. 9%
9. 9%
29. 8%
2. 2%
22%
20%
35%
24%
12%
2013E
2, 104. 9
5. 5
10. 5
20. 8
32. 9
48. 4
66. 1
88. 4
21.9
20.6
32.1
33.6
108. 2
30.7
28.5
45.9
36.7
141. 9
To t al
281. 1
430. 7
606. 6
725. 2
856. 4
1, 063. 9
1, 472. 7
384.4
369.5
575.2
505.9
1, 834. 9
471.6
456.1
706.9
612.2
2, 246. 8
% mix NA
98. 0%
97. 6%
96. 6%
95. 5%
94. 3%
93. 8%
94. 0%
94.3%
94.4%
94.4%
93.4%
94. 1%
93.5%
93.8%
93.5%
94.0%
93. 7%
2. 0%
2. 4%
3. 4%
4. 5%
5. 7%
6. 2%
6. 0%
5.7%
5.6%
5.6%
6.6%
5. 9%
6.5%
6.3%
6.5%
6.0%
6. 3%
39%
18%
17%
23%
39%
22%
26%
25%
25%
25%
22%
23%
22%
22%
22%
653% 1091%
47%
37%
34%
32%
48%
1%
30%
22%
41%
39%
43%
9%
31%
% mix Int'l
% change NA
% change Int'l
36%
52%
100%
280%
Figure 37: Quarterly Income Statement
2009A
2010A
2011A
2012A
2013E
2014E
TOTA L NET SA LES (% YOY / SA M E STORE SA LES)
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
$200.0
164.6
269.5
222.2
+27.1
+5.1
+16.2
+24.0
$229.4
204.8
328.6
301.2
+14.7
+24.4
+21.9
+35.5
$312.7
291.3
465.5
403.1
+36.3
+42.3
+41.7
+33.9
$384.4
369.5
575.2
505.9
+22.9
+26.8
+23.6
+25.5
$471.6
456.1
706.9
612.2
+22.7
+23.5
+22.9
+21.0
$573.1
555.0
855.0
739.0
+21.5
+21.7
+21.0
+20.7
YR
$856.4
+18.1
$1,063.9
+24.2
$1,472.7
+38.4
$1,834.9
+24.6
$2,246.8
+22.4
$2,722.1
+21.2
COST OF G OODS SOLD
1Q
2Q
3Q
4Q
(% GROSS MA R GI N) (B P S CHG )
MAR
JUN
SEP
DEC
$110.8
90.9
136.2
108.4
(44.6)
(44.8)
(49.5)
(51.2)
(-295)
(-48)
(-153)
(+51)
$121.8
104.9
161.2
145.6
(46.9)
(48.8)
(50.9)
(51.7)
(+231)
(+402)
(+148)
(+42)
$167.6
156.6
240.4
195.2
(46.4)
(46.3)
(48.4)
(51.6)
(-53)
(-253)
(-259)
(-9)
$209.2
200.0
294.8
251.6
(45.6)
(45.9)
(48.7)
(50.3)
(-81)
(-40)
(+39)
(-132)
$255.1
239.9
360.5
302.4
(45.9)
(47.4)
(49.0)
(50.6)
(+34)
(+153)
(+25)
(+34)
$308.0
293.4
436.5
365.0
(46.3)
(47.1)
(48.9)
(50.6)
(+33)
(-26)
(-6)
(+1)
YR
$446.3
(47.9)
(-105)
$533.4
(49.9)
(+197)
$759.8
(48.4)
(-146)
$955.6
(47.9)
(-48)
$1,157.9
(48.5)
(+54)
$1,402.9
(48.5)
(-0)
SELLING, G ENERA L & A DM IN EXP ENSES
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
$81.3
70.3
86.3
86.9
$324.9
(40.7) (-417)
(42.7)
(-44)
(32.0) (+105)
(39.1) (+115)
(37.9)
(-40)
(% o f SA LES) (B P S CHG)
$94.0
93.0
110.7
120.4
(41.0)
(45.4)
(33.7)
(40.0)
(+33)
(+270)
(+169)
(+86)
$123.9
123.4
150.1
152.6
(39.6)
(42.4)
(32.3)
(37.9)
(-137)
(-307)
(-144)
(-212)
$150.8
157.7
189.4
172.6
(39.2)
(42.7)
(32.9)
(34.1)
(-39)
(+33)
(+68)
(-373)
$203.1
189.3
221.2
205.0
(43.1)
(41.5)
(31.3)
(33.5)
(+383)
(-120)
(-164)
(-65)
$243.6
230.3
273.6
252.4
(42.5)
(41.5)
(32.0)
(34.2)
(-56)
(+0)
(+71)
(+67)
$418.2
(39.3)
(+137)
$550
(37.4)
(-195)
$671
(36.5)
(-80)
$818.5
(36.4)
(-12)
$999.9
(36.7)
(+30)
OP ER A TI NG I NCOM E (% OP ER M A RG IN) (% CHG)
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
$7.9
3.4
47.1
26.9
(3.9)
(2.1)
(17.5)
(12.1)
+83.7
+3.3
+1.3
+17.8
$13.6
6.9
56.7
35.2
$85.3
(10.0)
+10.9
$112.4
(5.9) +72.0
(3.4) +103.8
(17.3) +20.5
(11.7) +30.7
(10.6)
+31.8
$21.1
11.4
75.0
55.3
(6.8)
(3.9)
(16.1)
(13.7)
+55.6
+64.8
+32.2
+57.2
$24.4
11.7
91.0
81.6
(6.3)
(3.2)
(15.8)
(16.1)
+15.4
+3.2
+21.4
+47.5
$13.5
26.9
125.2
104.8
(2.9)
(5.9)
(17.7)
(17.1)
-44.7
+129.6
+37.6
+28.5
$21.5
31.3
144.9
121.6
(3.8)
(5.6)
(16.9)
(16.5)
+59.3
+16.2
+15.7
+16.0
$162.8
(11.1)
+44.9
$208.7
(11.4)
+28.2
$270.4
(12.0)
+29.6
$319.3
(11.7)
+18.1
-$0.7
-1.0
-1.0
-1.0
-$3.7
-(0.2)
-(0.2)
-(0.1)
-(0.2)
-(0.2)
-$1.0
-1.0
-1.0
-1.0
-$4.0
-(0.2)
-(0.2)
-(0.1)
-(0.1)
-(0.1)
$0.2
0.5
0.0
-0.6
$0.1
(0.1)
(0.2)
(0.0)
-(0.2)
(0.0)
$0.1
0.5
0.0
-0.6
-$0.1
(0.0)
(0.2)
(0.0)
-(0.2)
(0.0)
NET I NTEREST I NCOME (EXP ) (% o f SA LES)
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
-$0.5
-0.6
-0.5
-0.6
-$2.3
-(0.3)
-(0.4)
-(0.2)
-(0.3)
-(0.3)
-$0.5
-0.6
-0.5
-0.6
-$2.3
-(0.2)
-(0.3)
-(0.2)
-(0.2)
-(0.2)
-$0.6
-0.3
-1.6
-1.4
-$3.8
-(0.2)
-(0.1)
-(0.3)
-(0.4)
-(0.3)
-$1.4
-1.3
-1.3
-1.2
-$5.2
-(0.4)
-(0.4)
-(0.2)
-(0.2)
-(0.3)
OTH ER INCOM E (EXP ) (% o f SA LES)
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
$0.0
-0.4
0.1
-0.3
-$0.5
(0.0)
-(0.4)
(0.1)
-(0.2)
-(0.1)
-$0.7
-0.2
-0.2
-0.1
-$1.2
-(0.6)
-(0.2)
-(0.1)
-(0.1)
-(0.2)
-$0.5
-0.4
-1.2
0.0
-$2.1
-(0.3)
-(0.2)
-(0.5)
(0.0)
-(0.3)
$0.1
0.5
0.0
-0.6
-$0.1
(0.0)
(0.3)
(0.0)
-(0.3)
(0.0)
Figure 38: Quarterly Income Statement - continued
2009A
2010A
2011A
2012A
P RETA X I NCOME (LOSS)
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
$7.4
2.4
46.6
26.1
$82.5
(3.7)
(1.5)
(17.3)
(11.7)
(9.6)
+53.1
-2.0
+4.2
+46.1
+18.0
$12.4
6.1
56.0
34.5
$108.9
(5.4) +67.8
(3.0) +151.9
(17.0) +20.0
(11.4) +32.1
(10.2) +32.0
$20.1
10.7
72.2
53.9
$156.9
(6.4)
(3.7)
(15.5)
(13.4)
(10.7)
+62.3
+74.1
+29.0
+56.4
+44.0
I NCOME TA XES (CREDIT)
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
2013E
2014E
(% P RETA X MA R GI N) (% CHG)
$23.1
10.9
89.6
79.7
$203.4
(6.0)
(3.0)
(15.6)
(15.8)
(11.1)
+15.3
+2.0
+24.1
+48.0
+29.7
$13.0
26.4
124.1
103.2
$266.7
(2.8)
(5.8)
(17.6)
(16.9)
(11.9)
-43.8
+142.2
+38.5
+29.4
+31.1
$20.6
30.8
143.8
120.0
$315.2
(3.6)
(5.5)
(16.8)
(16.2)
(11.6)
(% TA X RA TE)
$3.1
1.0
20.5
11.0
(41.9)
(40.9)
(44.0)
(42.3)
$5.2
2.6
21.1
11.5
(42.0)
(43.0)
(37.7)
(33.4)
$7.9
4.5
26.2
21.3
(39.5)
(41.7)
(36.3)
(39.6)
$8.5
4.2
32.3
29.6
(36.6)
(38.9)
(36.1)
(37.1)
$5.2
10.4
48.7
40.5
(39.9)
(39.3)
(39.3)
(39.3)
$7.5
11.2
52.5
43.8
(36.5)
(36.5)
(36.5)
(36.5)
$35.6
(43.2)
$40.4
(37.1)
$59.9
(38.2)
$74.7
(36.7)
$104.8
(39.3)
$115.0
(36.5)
NET EA RNINGS
(% NET MA RGI N) % CH G
$4.3
1.4
26.1
15.0
(2.1)
(0.9)
(9.7)
(6.8)
+49.0
+4.9
+1.7
+80.8
$7.2
3.5
34.9
22.9
$46.9
(5.5)
+22.6
$68.5
(3.1) +67.7
(1.7) +142.9
(10.6) +33.5
(7.6) +52.5
(6.4)
+46.1
+58.2
+16.5
+15.9
+16.3
+18.2
$12.1
6.2
46.0
32.6
(3.9)
(2.1)
(9.9)
(8.1)
+69.3
+78.2
+31.9
+41.9
$14.7
6.7
57.3
50.1
(3.8)
(1.8)
(10.0)
(9.9)
+20.8
+6.8
+24.6
+54.0
$7.8
16.1
75.4
62.7
(1.7)
(3.5)
(10.7)
(10.2)
-46.7
+140.7
+31.6
+25.0
$13.1
19.6
91.3
76.2
(2.3)
(3.5)
(10.7)
(10.3)
+67.2
+21.8
+21.1
+21.6
$96.9
(6.6)
+41.5
$128.8
(7.0)
+32.9
$162.0
(7.2)
+25.8
$200.1
(7.4)
+23.6
$0.12
0.18
0.84
+65.5
+20.8
+20.4
EA R NI NGS P ER SH A RE - - GA A P , F U LLY DI LU TED A F TER EXTR A I TEM / % CH G
cons
1Q MAR
2Q JUN
3Q SEP
4Q DEC
YR
$0.04
0.01
0.26
+47.6
+3.3
+0.1
$0.07 +66.1
0.03 +140.6
0.34 +32.4
$0.12
0.06
0.44
+64.5
+73.3
+28.5
$0.14
0.06
0.54
+19.7
+5.9
+22.6
0.50
0.65
0.85
cons
$0.07
-47.4
0.15 +137.5
0.70 +30.4
0.14
0.70
cons
0.15
+77.2
0.22
+49.2
0.31
+40.0
0.47
+51.4
0.58
+24.0
0.55
0.70
+21.1
$0.46
+20.6
$0.67
+44.2
$0.92
+38.4
$1.21
+30.8
$1.50
+24.6
1.47
$1.85
+22.9
107.1
107.4
107.7
108.1
107.6
+1.3
+1.4
+0.9
+0.9
+1.1
108.2
108.3
108.4
108.5
108.3
+1.0
+0.8
+0.6
+0.4
+0.7
0.12
0.18
1.83
A VG SHA RE S OU TSTA NDI NG - - F U LLY DI LU TED / % CHG
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
100.9
101.2
101.5
101.7
101.3
+1.0
+1.5
+1.6
+2.0
+1.5
101.8
102.1
102.3
104.0
102.6
+1.0
+1.0
+0.8
+2.2
+1.2
104.8
105.0
105.1
105.3
105.1
+2.9
+2.9
+2.7
+1.3
+2.4
105.7
106.0
106.8
107.1
106.4
+0.9
+0.9
+1.7
+1.7
+1.3
DEP R ECI A TI ON & A M ORTI Z A TI ON (% SA LES) / % CHG
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
$4.5
5.3
5.7
5.9
$21.4
(2.2)
(3.2)
(2.1)
(2.7)
(2.5)
+49.7
+70.4
+46.9
+28.3
+46.6
$6.8
6.7
7.3
7.5
$28.3
(3.0)
(3.3)
(2.2)
(2.5)
(2.7)
+51.4
+26.8
+28.1
+27.1
+32.4
$8.6
8.1
9.2
10.3
$36.3
(2.8)
(2.8)
(2.0)
(2.6)
(2.5)
+26.7
+21.1
+26.5
+37.8
+28.3
$10.6
10.1
11.0
11.3
$43.1
(2.8)
(2.7)
(1.9)
(2.2)
(2.3)
+23.0
+24.7
+19.5
+9.6
+18.7
$11.8
12.8
14.1
13.7
$52.5
(2.5)
(2.8)
(2.0)
(2.2)
(2.3)
+11.8
+26.2
+28.0
+21.1
+21.8
$17.2
15.8
17.5
17.0
$67.5
(3.0)
(2.9)
(2.1)
(2.3)
(2.5)
+45.2
+23.9
+24.0
+23.9
+28.7
(9.1)
(5.9)
(17.7)
(18.4)
(13.7)
+17.6
+12.2
+21.2
+41.6
+26.5
$25.3
39.7
139.3
118.5
$322.9
(5.4)
(8.7)
(19.7)
(19.4)
(14.4)
-27.6
+81.7
+36.6
+27.6
+28.2
$38.7
47.1
162.4
138.6
$386.8
(6.8)
(8.5)
(19.0)
(18.8)
(14.2)
+52.7
+18.7
+16.6
+17.0
+19.8
EB I TDA (% M A R GI N) / % CHG
1Q
2Q
3Q
4Q
MAR
JUN
SEP
DEC
YR
$12.4
8.7
52.8
32.8
$106.6
(6.2)
(5.3)
(19.6)
(14.8)
(12.5)
+69.7
+35.9
+4.8
+19.5
+16.5
$20.4
13.6
64.0
42.7
$140.7
(8.9)
(6.6)
(19.5)
(14.2)
(13.2)
+64.6
+56.9
+21.3
+30.0
+31.9
$29.8
19.5
84.2
65.6
$199.1
(9.5)
(6.7)
(18.1)
(16.3)
(13.5)
+46.0
+43.3
+31.6
+53.7
+41.5
$35.0
21.8
102.0
92.9
$251.8
Figure 39: Annual Income Statement
CA GR
08- 12
13- 17E
2006
2007
2008
2009
2010
2011
2012
2013E
2014E
2015E
2016E
2017E
SALES
%
% Change
CHANGE
$430.7
53.2%
$606.6
40.8%
$725.2
19.6%
$856.4
18.1%
$1,063.9
24.2%
$1,472.7
38.4%
$1,834.9
24.6%
$2,246.8
22.4%
$2,722.1
21.2%
$3,301.1
21.3%
$4,007.5
21.4%
$4,809.0
20.0%
20.4%
16.4%
COST OF GOODS SOLD
%
% Gross
GROSSMargin
MARGIN
215.1
50.1%
301.5
50.3%
370.3
48.9%
446.3
47.9%
533.4
49.9%
759.8
48.4%
955.6
47.9%
1,157.9
48.5%
1,402.9
48.5%
1,695.1
48.7%
2,043.8
49.0%
2,447.8
49.1%
20.9%
16.1%
SG&A EXPENSE
Expense
% SGA Ratio
%
% Change
CHANGE
158.7
36.8%
58.7%
218.8
36.1%
37.9%
278.0
38.3%
27.1%
324.9
37.9%
16.8%
418.2
39.3%
28.7%
550.1
37.4%
31.5%
670.6
36.5%
21.9%
818.5
36.4%
22.1%
999.9
36.7%
22.2%
1,219.8
37.0%
22.0%
1,484.8
37.1%
21.7%
1,779.3
37.0%
19.8%
19.3%
16.8%
6.6
1.5%
9.8
1.6%
14.6
2.0%
21.4
2.5%
28.3
2.7%
36.3
2.5%
43.1
2.3%
52.5
2.3%
67.5
2.5%
81.9
2.5%
99.4
2.5%
119.3
2.5%
24.2%
17.9%
$56.9
13.2%
$86.3
14.2%
$76.9
10.6%
$85.3
10.0%
$112.4
10.6%
$162.8
11.1%
$208.7
11.4%
$270.4
12.0%
$319.3
11.7%
$386.2
11.7%
$478.9
11.9%
$581.9
12.1%
22.1%
16.6%
INTEREST INCOME (EXP)
% MARGIN
0.0
0.0%
0.0
0.0%
(0.9)
-0.1%
(2.3)
-0.3%
(2.3)
-0.2%
(3.8)
-0.3%
(5.2)
-0.3%
(3.7)
-0.2%
(4.0)
-0.1%
(4.0)
-0.1%
(4.0)
-0.1%
(4.0)
-0.1%
43.6%
1.4%
OTHER INCOME (EXP)
% MARGIN
2.2
0.5%
2.8
0.5%
(6.2)
-0.9%
(0.5)
-0.1%
(1.2)
-0.1%
(2.1)
-0.1%
(0.1)
0.0%
0.1
0.0%
(0.1)
0.0%
0.0
0.0%
0.0
0.0%
0.0
0.0%
-57.9%
-100.0%
PRETAX INCOME
% MARGIN
$59.1
13.7%
$89.0
14.7%
$69.9
9.6%
$82.5
9.6%
$108.9
10.2%
$156.9
10.7%
$203.4
11.1%
$266.7
11.9%
$315.2
11.6%
$382.2
11.6%
$474.9
11.8%
$577.9
12.0%
23.8%
16.7%
INCOME TAXES
% TAX RATE
20.1
34.0%
36.5
41.0%
31.7
45.3%
35.6
43.2%
40.4
37.1%
59.9
38.2%
74.7
36.7%
104.8
39.3%
115.0
36.5%
137
35.8%
169
35.5%
202
35.0%
18.7%
14.1%
NET INCOME (BEFORE ITEMS)
% NET MARGIN
$39.0
9.1%
$52.5
8.7%
$38.2
5.3%
$46.9
5.5%
$68.5
6.4%
$96.9
6.6%
$128.8
7.0%
$162.0
7.2%
$200.1
7.4%
$245.6
7.4%
$306.3
7.6%
$375.6
7.8%
27.5%
18.3%
EARNINGS PER SHARE
% CHANGE
$0.39
58.2%
$0.53
33.8%
$0.38
-27.1%
$0.46
20.8%
$0.67
44.3%
$0.92
38.1%
$1.21
30.8%
$1.50
24.6%
$1.85
23.0%
$2.28
23.3%
$2.85
25.1%
$3.50
22.8%
25.8%
18.4%
SHARES OUTSTANDING
99.2
99.9
99.8
101.3
102.6
105.1
106.4
107.6
108.3
107.8
107.5
107.4
1.3%
0.0%
EBITDA
EBITDA MARGIN
% CHANGE
$63.5
14.8%
77.0%
$96.0
15.8%
51.2%
$91.5
12.6%
-4.7%
$106.6
12.5%
16.5%
$140.7
13.2%
31.9%
$199.1
13.5%
41.5%
$251.8
13.7%
26.5%
$322.9
14.4%
28.2%
$386.8
14.2%
19.8%
$468.1
14.2%
21.0%
$578.3
14.4%
23.5%
$701.2
14.6%
21.3%
22.4%
16.8%
DEPRECIATION & AMORTIZATION
% MARGIN
OPERATING INCOME
% MARGIN
Figure 40: Statement of Cash Flows
NET INCOME
DEPRECIATION & AMORTIZATION
DEFERRED INCOME TAXES
NET STOCK-BASED COMPENSATION
OTHER
TOTAL OPERATING SOURCES
2006
2007
2008
$39.0
9.8
(6.7)
2.0
4.1
$48.2
$52.6
14.6
(4.9)
4.2
2.0
$68.4
$38.2
21.3
(2.8)
8.5
14.2
$79.4
SOU RCE S OF CA SH
2009
2010
$46.8
28.2
(5.2)
12.9
(3.6)
$79.2
$68.5
31.3
(10.3)
16.2
3.6
$109.3
2011
2012
2013E
$96.9
36.3
3.6
18.1
6.3
$161.2
$128.8
43.1
(13.0)
19.8
12.0
$190.7
$162.0
52.5
0.0
20.8
0.0
$235.3
U SE S OF CA SH
CAPITAL EXPENDITURES
15.1
34.0
38.6
19.8
30.2
79.4
50.7
85.0
INCREASE (DECREASE) IN
INVENTORIES
ACCOUNTS RECEIVABLE & OTHER DUE
PRE-PAID EXPENSES
(INCREASE) DECREASE IN
ACCOUNTS PAYABLE / ACCRUED EXPENSES
OTHER LIABILITIES
26.5
20.8
4.0
84.0
24.2
2.1
19.5
(2.6)
7.2
(33.0)
(3.8)
(1.9)
65.2
32.3
4.1
114.6
33.9
42.6
(4.7)
53.4
4.1
64.5
49.2
23.5
(18.9)
5.0
(23.7)
(3.5)
(11.6)
(2.5)
(7.3)
6.1
(37.5)
(5.0)
(40.7)
(4.6)
(35.4)
(26.5)
(36.7)
0.0
TOTAL WORKING CAPITAL USES
37.5
83.1
9.9
(39.9)
59.2
146.0
(9.1)
100.5
TOTAL OPERATING USES
52.6
117.0
48.5
(20.0)
89.4
225.4
41.6
185.5
INTERNA L CA SH GE NE RA TI ON (F U NDS NE EDED)
($4. 4)
($48. 6)
$30. 9
$19. 9
($64. 2)
$149. 1
$49. 8
$99. 2
EXTE RNA L SOU RCES A ND CHA NGE S IN CA SH
SHORT-TERM INVESTMENTS, NET
INCREASE IN LONG-TERM DEBT
NET BORROWINGS UNDER CREDIT FAC
PROCEEDS FROM STOCK OPTIONS EXCERCISED
EXCESS TAX BENEFITS FR STOCK-BASED COMP
ISSUANCE OF COMMON AND PREF STOCK
SHARE REPURCHASE
PAYMENT AND REDEMPTION OF DIVIDENDS
OTHER FINANCING COSTS
NET CASH USED IN DISCONTD OPERATIONS
0.0
(0.3)
0.0
3.5
11.3
0.0
0.0
0.0
(1.9)
0.0
0.0
8.9
0.0
3.2
6.9
0.0
0.0
0.0
(0.9)
0.0
0.0
6.7
25.0
2.0
2.1
0.0
0.0
0.0
(4.0)
0.0
0.0
(0.0)
(25.0)
5.1
5.1
0.0
0.0
0.0
(1.8)
0.0
0.0
(4.2)
0.0
7.3
4.2
0.0
0.0
0.0
(11.7)
0.0
0.0
(1.8)
25.0
14.6
10.3
0.0
0.0
0.0
(12.4)
0.0
0.0
(44.3)
25.0
14.8
17.9
0.0
0.0
0.0
2.7
0.0
0.0
(9.1)
0.0
15.0
20.0
0.0
0.0
0.0
(15.0)
0.0
TOTAL EXTERNAL SOURCES
$12.6
$18.0
$31.9
($16.5)
($4.4)
$35.8
$16.0
$10.9
BEGINNING CASH BALANCE
63.0
70.7
40.6
102.0
187.3
203.9
175.4
341.8
INCRESE (DECREASE) IN CASH
8.2
(30.6)
62.8
82.7
15.6
(28.4)
165.1
60.7
(0.5)
70.7
0.5
40.6
(1.4)
102.0
2.6
187.3
1.0
203.9
(0.1)
175.4
1.3
341.8
1.0
403.5
($4. 4)
($48. 6)
$99. 2
$19. 9
($64. 2)
$149. 1
$49. 8
FX effects
ENDING CASH BALANCE
TOTA L E XTERNA L SOU RCE S & CA SH
$30. 9
Figure 41: Balance Sheet
A SSE TS
CASH AND CASH EQUIVALENTS
ST INVESTMENTS
ACCOUNTS RECEIVABLE & OTHER DUE
MERCHANDISE INVENTORIES
PRE-PAID EXPENSES & OTHER
DEFERRED TAXES & OTHER
TOTAL CURRENT ASSETS
2006
2007
2008
2009
2010
2011
2012
2013E
$70.7
0.0
71.9
81.0
8.9
12.5
245.0
$40.6
0.0
93.5
166.1
11.0
11.0
322.2
$102.0
0.0
81.3
182.2
18.0
12.8
396.4
$187.3
0.0
79.4
148.5
20.0
12.9
448.0
$203.9
0.0
102.0
215.4
19.3
15.3
555.9
$175.4
0.0
134.0
324.4
39.6
16.2
689.7
$341.8
0.0
175.5
319.3
43.9
23.1
903.6
$403.5
0.0
224.7
383.8
67.4
23.1
1,102.4
29.9
52.3
73.5
72.9
76.1
159.1
180.9
213.4
7.9
5.2
1.4
6.5
8.2
1.4
5.5
8.7
3.4
5.7
13.9
5.1
3.9
21.3
18.2
5.5
15.9
49.0
4.5
22.6
45.5
4.5
22.6
45.5
NET PROPERTY & EQUIPMENT
GOODWILL, NET
DEFERRED INCOME TAXES
OTHER
TOTA L A SSETS
$289. 4
$390. 6
$487. 6
$545. 6
$675. 4
$919. 2
$1, 157. 1
$1, 388. 5
$42.7
26.2
2.6
0.0
$71.6
$55.0
36.6
4.1
0.0
$95.7
$72.4
53.6
6.8
0.3
$133.1
$68.7
42.3
9.2
0.0
$120.2
$84.7
57.6
6.9
0.0
$149.1
$100.5
76.2
6.9
0.0
$183.6
$143.7
99.4
9.1
0.0
$252.2
$153.5
122.8
10.0
0.0
$286.3
0.9
1.9
0.0
0.6
0.0
$3.4
0.5
9.3
0.0
4.7
0.0
$14.4
0.1
13.1
0.0
10.2
0.0
$23.3
0.0
10.9
0.0
14.5
0.0
$25.4
0.0
9.1
0.0
20.2
0.0
$29.3
0.0
70.8
0.0
28.3
0.0
$99.2
0.0
52.8
0.0
35.2
0.0
$87.9
0.0
42.8
0.0
38.7
0.0
$81.5
TOTAL SHAREHOLDERS' EQUITY
$214. 4
$280. 5
$331. 1
$400. 0
$497. 0
$636. 4
$816. 9
$1, 020. 7
TOTA L LI A B A ND S/H EQU ITY
$289. 4
$390. 6
$487. 6
$545. 6
$675. 4
$919. 2
$1, 157. 1
$1, 388. 5
LIA B I LITIES & SH A REH OLDERS EQU ITY
ACCOUNTS PAYABLE
ACCRUED LIABILITIES
CURRENT PORTION OF LONG-TERM DEBT
INCOME TAXES PAYABLE
TOTAL CURRENT LIABILITIES
DEFFERRED RENT/TENANT ALLOWANCES
LONG-TERM DEBT
PREFERRED STOCK
OTHER LONG-TERM LIABILITIES
DEFERRED TAXES
TOTAL LONG-TERM LIABILITIES
Analyst Biography
Corinna joined Wedbush in November 2011 to cover the Footwear, Apparel and Accessories sectors. She previously worked on the
buyside where she covered small-cap Consumer growth stocks for three years. Prior to the buyside, Corinna worked in the Apparel
industry, running the Financial Planning and Analysis department for global apparel manufacturer and retailer, Theory. Prior to her time
in industry, Corinna covered specialty retail stocks for five years at Citigroup and UBS and started her career on Wall Street as an
Investment Banking analyst at JP Morgan. Corinna is a graduate of the University of Pennsylvania with a degree in Economics, Political
Science and Philosophy. Corinna's coverage currently includes COH, CROX, DECK, FNP, KORS, NKE, SHOO, SKX and VFC.
Corinna was recently ranked #1 in the Wall Street Journal's Best on the Street survey for the Clothing and Accessories sector.
Analyst Certification
I, Corinna Freedman, certify that the views expressed in this report accurately reflect my personal opinion and that I have not and will not,
directly or indirectly, receive compensation or other payments in connection with my specific recommendations or views contained in this report.
Disclosure information regarding historical ratings and price targets is available at http://www.wedbush.com/ResearchDisclosure/DisclosureQ213.pdf
Companies mentioned:
Company
Nike Inc.
Skechers USA
V.F. Corp
Macy's Inc
Nordstrom Inc.
Foot Locker Inc.
Finish Line Inc.
Dick's Sporting Goods
Ticker
NKE
SKX
VFC
M
JWN
FL
FINL
DKS
Price
$63.47
$27.04
$198.26
$49.69
$62.15
$36.40
$22.33
$50.58
WS Rating
NEUTRAL
NEUTRAL
OUTPERFORM
NR
NR
NR
NR
NR
Target
$58.00
$20.00
$205.00
NR
NR
NR
NR
NR
Investment Rating System:
Outperform: Expect the total return of the stock to outperform relative to the median total return of the analyst’s (or the analyst’s team) coverage
universe over the next 6-12 months.
Neutral: Expect the total return of the stock to perform in-line with the median total return of the analyst’s (or the analyst’s team) coverage
universe over the next 6-12 months.
Underperform: Expect the total return of the stock to underperform relative to the median total return of the analyst’s (or the analyst’s team)
coverage universe over the next 6-12 months.
The Investment Ratings are based on the expected performance of a stock (based on anticipated total return to price target) relative to the
other stocks in the analyst’s coverage universe (or the analyst’s team coverage).*
Rating Distribution
(as of June 30, 2013)
Outperform:54%
Neutral: 41%
Underperform: 5%
Investment Banking Relationships
(as of June 30, 2013)
Outperform:15%
Neutral: 1%
Underperform: 0%
The Distribution of Ratings is required by FINRA rules; however, WS’ stock ratings of Outperform, Neutral, and Underperform most closely
conform to Buy, Hold, and Sell, respectively. Please note, however, the definitions are not the same as WS’ stock ratings are on a relative
basis.
The analysts responsible for preparing research reports do not receive compensation based on specific investment banking activity. The
analysts receive compensation that is based upon various factors including WS’ total revenues, a portion of which are generated by WS’
investment banking activities.
Under Armour | 23
Wedbush Equity Research Disclosures as of July 17, 2013
Company
Disclosure
Under Armour
1
Research Disclosure Legend
1.
WS makes a market in the securities of the subject company.
2.
WS managed a public offering of securities within the last 12 months.
3.
WS co-managed a public offering of securities within the last 12 months.
4.
WS has received compensation for investment banking services within the last 12 months.
5.
WS provided investment banking services within the last 12 months.
6.
WS is acting as financial advisor.
7.
WS expects to receive compensation for investment banking services within the next 3 months.
8.
WS provided non-investment banking securities-related services within the past 12 months.
9.
WS has received compensation for products and services other than investment banking services within the past 12 months.
10. The research analyst, a member of the research analyst’s household, any associate of the research analyst, or any individual
directly involved in the preparation of this report has a long position in the common stocks.
11. WS or one of its affiliates beneficially own 1% or more of the common equity securities.
12. The analyst maintains Contingent Value Rights that enables him/her to receive payments of cash upon the company’s meeting
certain clinical and regulatory milestones.
Price Charts
Wedbush disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA regulations. Price charts for
companies initiated upon in the current quarter, and rating and target price changes occurring in the current quarter, will not be displayed until
the following quarter. Additional information on recommended securities is available on request.
* WS changed its rating system from (Strong Buy/Buy/Hold/Sell) to (Outperform/ Neutral/Underperform) on July 14, 2009.
Please access the attached hyperlink for WS’ Coverage Universe: http://www.wedbush.com/services/cmg/equities-division/research/equityresearch Applicable disclosure information is also available upon request by contacting Ellen Kang in the Research Department at (213) 6884529, by email to ellen.kang@wedbush.com, or the Business Conduct Department at (213) 688-8090. You may also submit a written request
to the following: Business Conduct Department, 1000 Wilshire Blvd., Los Angeles, CA 90017.
OTHER DISCLOSURES
RESEARCH DEPT. * (213) 688-4505 * www.wedbush.com
EQUITY TRADING Los Angeles (213) 688-4470 / (800) 421-0178 * EQUITY SALES Los Angeles (800) 444-8076
CORPORATE HEADQUARTERS (213) 688-8000
The information herein is based on sources that we consider reliable, but its accuracy is not guaranteed. The information contained herein is not a
representation by this corporation, nor is any recommendation made herein based on any privileged information. This information is not intended to be
nor should it be relied upon as a complete record or analysis; neither is it an offer nor a solicitation of an offer to sell or buy any security mentioned
herein. This firm, Wedbush Securities, its officers, employees, and members of their families, or any one or more of them, and its discretionary and
advisory accounts, may have a position in any security discussed herein or in related securities and may make, from time to time, purchases or sales
thereof in the open market or otherwise. The information and expressions of opinion contained herein are subject to change without further notice. The
herein mentioned securities may be sold to or bought from customers on a principal basis by this firm. Additional information with respect to the
information contained herein may be obtained upon request.
Under Armour | 24
EQUITY RESEARCH DEPARTMENT
(213) 688-4529
DIRECTOR OF RESEARCH
Mark D. Benson (213) 688-4435
MANAGER, RESEARCH OPERATIONS
Ellen Kang (213) 688-4529
RETAIL AND CONSUMER
Consum er Products
Rommel T. Dionisio
Kurt M. Frederick, CFA CPA
(212) 938-9934
(415) 274-6822
Footw ear, Apparel and Accessories
Corinna Freedman
(212) 668-9876
Alicia Reese
(212) 938-9927
Healthy Lifestyles
Kurt M. Frederick, CFA CPA
Restaurants
Nick Setyan
Colin Radke
(415) 274-6822
TECHNOLOGY, INTERNET, MEDIA & SOCIAL MEDIA
LIFE SCIENCES
Com m unications and Application Softw are
Shyam Patil, CFA
(213) 688-8062
Biotechnology/Biopharm aceuticals/BioDefense
Gregory R. Wade, Ph.D.
(415) 274-6863
David M. Nierengarten, Ph.D.
(415) 274-6862
Christopher N. Marai, Ph.D.
(415) 274-6861
Com m unications Equipm ent
Rohit Chopra
Sanjit Singh
Ryan Flanagan
(212) 668-9871
(212) 938-9922
(212) 938-9942
Com puter Services: Financial Technology
Gil B. Luria
(213) 688-4501
Aaron Turner
(213) 688-4429
(213) 688-4519
(213) 688-6624
Enterprise Softw are
Steve Koenig
Specialty Retail: Hardlines
Joan L. Storms, CFA
John Garrett, CFA
(213) 688-4537
(213) 688-4523
Entertainm ent: Retail
Michael Pachter
Nick McKay
Nick Citrin
(213) 688-4474
(213) 688-4343
(213) 688-4495
Specialty Retail: Softlines
Betty Chen
Alex Pham
(415) 273-7328
(415) 273-7315
Entertainm ent: Softw are
Michael Pachter
Nick McKay
Nick Citrin
(213) 688-4474
(213) 688-4343
(213) 688-4495
Internet and E-Com m erce
Michael Pachter
Nick McKay
Nick Citrin
(213) 688-4474
(213) 688-4343
(213) 688-4495
Media
James Dix, CFA
(213) 688-4315
Movies and Entertainm ent
Michael Pachter
Nick McKay
Nick Citrin
(213) 688-4474
(213) 688-4343
(213) 688-4495
Sem iconductors
Betsy Van Hees
Ryan Jue, CFA
(415) 274-6869
(415) 263-6669
RETAIL/CONSUMER MARKET RESEARCH
Gabriella Santaniello
(213) 688-4557
INDUSTRIAL GROWTH TECHNOLOGY
Clean Technology
Craig Irw in
Min Xu
(212) 938-9926
(212) 938-9925
Environmental Services / Building Products
Al Kaschalk
(213) 688-4539
Industrial Biotechnology
Liana Moussatos, Ph.D.
(415) 263-6626
(415) 274-6861
Water and Renew able Energy Solutions
David Rose, CFA
(213) 688-4319
EQUITY SALES
Los Angeles
San Francisco
New York
Boston
(213) 688-4470 / (800) 444-8076
(415) 274-6800
(212) 938-9931
(617) 832-3700
Em erging Pharm aceuticals
Liana Moussatos, Ph.D.
Richard Lau
(415) 263-6626
(415) 274-6851
(415) 274-6861
Healthcare Services - Managed Care
Sarah James
(213) 688-4503
Daniel Patt
(212) 938-9937
(415) 274-6801
Medical Devices
Tao Levy
EQUITY TRADING
Los Angeles
San Francisco
New York
Boston
CORPORATE HEADQUARTERS
1000 Wilshire Blvd., Los Angeles, CA 90017-2465
Tel: (213) 688-8000 www.wedbush.com
(212) 938-9948
Medical Diagnostics and Life Sciences Tools
Zarak Khurshid
(415) 274-6823
(213) 688-4470 / (800) 421-0178
(415) 274-6811
(212) 344-2382
(617) 832-3700

Under Armour (UA)

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