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Under Armour earnings jump; investors not wowed

Baltimore-based Under Armour Inc. reported favorable third-quarter earnings on Thursday, but they were met with a slight drop in the market.

The athletic apparel company reported a 26 percent increase in net revenue and a 27 percent increase in net income compared with the third quarter of 2012. Diluted earnings per share increased 14 cents from one year before.

It was the 14th consecutive quarter that revenue grew by 20 percent or more, and the 16th consecutive quarter that apparel net revenue increased by 20 percent or more.

But the once-again positive earnings release was followed by a drop in the market Thursday. Under Armour was down 4.76 percent at close.

“The stock’s down today because basically (company executives) said, ‘We’re going to keep investing,’ and people don’t like that,” said Sam Poser, analyst for Sterne Agee, who covers Under Armour.

In general, said Poser, inventory was slightly higher than the ideal, but otherwise the earnings report was better than expected, as is usual. Outlook for 2013 net revenue increased slightly to 23 percent growth, and the company projected growth at the low end of 20 to 25 percent in 2014.

But for some stockholders who have enjoyed rapid growth in the stock since the start of the year, word of major investments overseas is unattractive.

“International has great dividends for us, but we know it’s going to be an investment and we know it’s going to take time,” CEO Kevin Plank said in a conference call about the third quarter earnings.

Plank spoke about global and domestic expansion strategies. The company made several announcements recently that reflected this focus.

Domestically, Under Armour announced Wednesday that it will open a new brand house at Tysons Corner Center in McLean, Va., in November. It also has plans for a new brand house and office in New York City.

On Tuesday, the company announced some developments in the leadership.

Chief Operating Officer Kip Fulks added president of product to his duties, and Henry Stafford, a senior vice president, was named president of North America. From a global standpoint, the company took on clothing-industry veterans Susie McCabe as senior vice president in global retail and Jason LaRose as senior vice president in global e-commerce.

Last week, Plank and Olympic swimming legend Michael Phelps hosted a grand opening event in Shanghai for the brand’s first retail theater. The company is taking a storytelling approach at the location, said Plank, reaching out to Chinese consumers with visuals.

Regarding all of this expansion, Poser said it can lead to growth, but not necessarily in the short term.

“We’re telling people to buy (the stock) but they’re people with a long-term time horizon,” he said.