UA : NYSE : US$53.01
Consumer & Retail — Footwear and Apparel
SOLID Q1 SALES MOMENTUM;
UPDATING EPS FOR STOCK SPLIT
We are expecting another solid Q1 print from UA when it reports
earnings on Thursday, April 24 BMO. Our consensus 4c EPS estimate
could prove conservative by 1-2c as we believe solid apparel and
footwear sales will likely drive top line growth in excess of our 25.3%
estimate. Specifically, we believe apparel categories in women’s and
kids continued to lead the momentum as new product introductions (e.g.
Amour Vent) along with updates to existing apparel lines continue to
resonate well with consumers. Our store checks also suggest recent
footwear launches (e.g., the Speedform Apollo) were very well received,
supporting our belief that UA is making strong progress in the category.
We believe UA is one of the few outperforming brands in retail, and as
such we would use the recent 15% pullback to add to positions.
We believe gross margin will likely top our +88bps estimate, largely
due to the continued supply chain benefits partially offset by
stronger yet lower margin footwear sales. We believe the work UA
has done to enhance its supply chain by instituting a longer term
forecasting methodology is translating into higher fill rates and
more on time deliveries while not stressing the system.
Now that UA will have full visibility into its fall order book, we
expect FY14 sales/EBIT guidance to be raised, albeit modestly, as
has been the custom for the past three years.
Our split adj. $60 target is a blend of 50x 2015EPS/25X EBITDA/DCF