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April 27, 2010


UA printed the right numbers for the right reasons. Accelerating top line due to capital deployed over the past 2-years to proactively grow its business. Top that with a 10% decline in inventories, and yes, guidance remains too low.

Solid numbers out of UA on most accounts. Printed $0.14 vs our $0.13, the Street’s $0.10, and $0.08 last year. UA blew away the top line, with 14.7% top line growth and 197 bps in EBIT margin expansion. On the plus side, apparel came in +30.5%. Not bad when you consider all those people who avoid this story because of their view that growth in this core business is slowing?  On the flip side, the bears will chew on footwear sales being down by 25% to 43mm. That’s actually spot-on with our expectations (we had footwear -28%), and think that this will accelerate meaningfully throughout the year as the footwear organization put in place by Gene McCarthy last summer starts to kick in.

One thing we think that UA will need to account for is why it only raised FY guidance by the 1Q beat. Either way, these numbers are incredibly conservative – especially when we’re seeing sales momentum on a 10% decline in inventories in one of the few spaces in retail that will have increasing wind at its back over the next 12 months.  

UA remains one of our favorites. 

We’ll be back with a refreshed model and any new take-aways after we digest the rest of the results.

R3: UA: Very Nice Setup for 2010 - UA SIGMA 


- Radioshack noted that although the company began selling the iPhone in some locations during its fourth quarter, sales did not have a meaningful impact on the quarter’s results given the limited rollout. However, by the end of the current quarter, the iPhone will be available in 3,000 locations. When asked if the company would be selling the next iteration of the phone at launch sometime this summer, the answer was neither yes or no.


- Let the Wal-Mart protests begin (again). Word has it that Wal-Mart is once again seeking entry in the New York City area, this time via Jamaica Bay in Brooklyn. While there has been no formal announcement or deal signed, union protestors and politicians are already planning their anti-Wal-Mart efforts. Expect protest to begin in the next week or so.


- Research firm Permuto has defined the “average online shopper” as: 56% female, 42 years old, mean household income of $65,000, and an annual online spend of $446. Interestingly, 88% of worldwide consumers have made an online purchase within in the past 6 months.


R3: UA: Very Nice Setup for 2010 - Calendar


Asian Governments Assisting Apparel Industries - Asian nations are assisting their struggling textile and apparel sectors financially. India, the second largest emerging economy in the region, will continue to have the 2% interest subsidy on bank loans to certain sectors that are labor intensive such as textiles, leather, handicrafts, cotton yarn, which are particularly hard hit by the fall in global demand. Pakistan textiles production continued to decrease because of lower cotton availability, electricity and gas shortages. Cambodian government is also in support measures for its apparel sector. Measures introduced to boost industrial output have included temporary tax relief for apparel industries, and $10m for re-training laid-off Cambodian apparel workers.  <fashionnetasia.com>

US Import Clothing Prices hits Record Low - According to the business information company Textiles Intelligence, the average price of clothing imports in United States has fallen to its lowest level in over 20 years. As of the end of 2009, the import clothing price is sitting at USD$2.96 per square meter equivalent (SME), which is 6.1% drop from the previous year, and 21% lower than the average price of USD$3.75 per SME that held for much of the 1990’s. <fashionnetasia.com>

Anta Sports Expects Sales to Grow +15% in 2010 - Anta Sports Products Ltd., China’s largest maker of athletic shoes, said sales may grow by at least 15% this year as it opens more stores. Anta, which sponsors China’s Olympic Committee as well as international women’s tennis players Jelena Jankovic and Zheng Jie, is benefitting as Chinese consumers buy more casual shoes and clothing. Retail sales in China rose 17.9% in the first quarter from a year earlier.

The Chinese shoemaker’s net income last year rose 40% to $183 mm and sales gained 27%. Anta plans to increase its outlets by 8.5% to 7,200 this year while product orders will increase as retailers replenish stock. Anta may consider raising prices in the fourth quarter as raw material costs such as cotton rise.   <bloomberg.com/news>

Bangkok Malls Struggle As They Enter Week 7 of Closed Doors - Bangkok malls, which have been closed for almost a month as antigovernment protestors have massed outside their doors, are looking for ways to help the small shops that are struggling as the protests stretch into their seventh week. At Siam Paragon, Bangkok’s upscale luxury mall, management is considering lowering rents, hiring shop employees who haven’t been able to work and redesigning marketing plans for the rest of the year to help tenants regain business, said a spokesman for Siam Paragon Development Corp. The mall has managed to open only five days during the past month. <wwd.com/business-news>

WMT Lawsuit - A federal appeals court Monday allowed a potentially landmark gender-discrimination lawsuit against Wal-Mart Stores Inc. to go forward as a class action. The opinion stemmed from a labor suit brought by Wal-Mart employee Betty Dukes and five other plaintiffs in 2001. Their complaint alleged the retailer’s corporate structure discriminated against women in terms of pay and opportunity for promotion, among other accusations. In its six-to-five opinion Monday, the appeals court affirmed the class-action certification, and stood by the lower court’s finding that members could seek back pay as well as injunctive and declaratory relief. <wwd.com/business-news>

Neiman Marcus CEO Hands Down the Reins - Burton M. Tansky, president and chief executive officer of Neiman Marcus Inc. and its wholly owned subsidiary, The Neiman Marcus Group, and a leading figure in luxury retailing for three decades, will retire on Oct. 6. Karen W. Katz, president and ceo of Neiman Marcus Stores and executive vice president of the group, will succeed Tansky as president and ceo, in a transition that has been long expected but remained a mystery as to exactly when. <wwd.com/business-news>

N Brown to Expand Into US Targeting Plus Sized Women's Market - N Brown Group Plc, the U.K. owner of the Fashion World and Simply Be catalogs, will expand in the U.S. this year as it targets heavier women in the country, a potential $35 billion market. <bloomberg.com/news/retail>

Gilt Groupe Expands Operations Leadership with a New VP - The luxury e-retailer named Christopher Halkyard vice president of operations. He will be responsible for managing Gilt’s supply chain and distribution network. He has held supply chain positions with Marc Ecko Enterprise and L’Occitane en Provence. <internetretailer.com>

Deckers Outdoor Corp. Hires Marketing and Information Technology Execs - Footwear manufacturer Deckers Outdoor Corp. has named Jessica Buttimer vice president of marketing and Yul Vanek vice president of information technology. <internetretailer.com>

American Apparel Opened a Shop-in-shop Inside London's High-end Department Store Selfridges - The 700-square-foot store is the first and only permanent American Apparel store of its kind and will be designed to highlight the company's latest women's styles. This is American Apparel's eighth location in London.  <licensemag.com>

Sport Supply Group Acquires More Assets - Sport Supply Group, Inc. has acquired substantially all of the assets of Coaches Sports Corner, a regional team sports distributor based in Sandusky, Ohio, and certain assets of Greg Larson Sports, a national cataloger and regional team sports distributor based in Brainerd, Minnesota. <sportsonesource.com>