--Third-quarter profit rose on broad-based sales gains, but 2013 view cautious

--Shares fall as Under Armour issues preliminary 2013 sales target that comes under Wall Street's expectations

--Under Armour's sales have notched strong gains this year, building on an impressive performance in 2011

(Adds background, details from Under Armour's conference call)

 
   By John Kell 
 

Under Armour Inc.'s (UA) third-quarter profit climbed 25% on broad-based sales growth across all segments, though a conservative preliminary outlook for 2013 pushed the athletic-goods maker's shares lower.

The company has notched impressive growth so far this year, building on a strong performance in 2011. Under Armour is resonating with customers through product launches that highlight water-resistant cotton shirts and fabrics that reflect the sun to keep athletes cool.

Analysts have praised Under Armour's efforts in footwear and its focus on winning over female consumers through products such as Armour Bras and yoga pants.

Though Under Armour's third-quarter sales saw another double-digit percentage gain, the growth came in slightly under expectations. And on a conference call with analysts, Under Armour -- which typically provides a conservative guidance -- said it expects sales growth in 2013 to be at "the lower end of our long term growth target of 20% to 25%." That view came under the 28% growth projected by analysts polled by Thomson Reuters.

The cautious guidance sent shares of Under Armour, which has steadily outperformed larger rival Nike Inc. (NKE) this year, down 6.4% to $53 in recent trading.

Analysts said Under Armour's stock weakness wasn't exactly a surprise as some investors wanted more from the high-flying stock. Under Armour's shares have soared 77% the past five years.

Sterne Agee analyst Sam Poser said the preliminary 2013 outlook commentary appeared light, though he put some of the blame on Under Armour's efforts to bolster supply-chain management to meet growth. Mr. Poser said Under Armour has a lot of potential, citing the company's expansion into hundreds of department stores and growth opportunities in the lifestyle category.

"We are advising our clients to buy on the weakness," Mr. Poser said.

Under Armour's broad sales gains contrast with Nike, which last month reported a second-straight quarter of declining profit as slowing growth in China and a surge in marketing costs weighed on its bottom line. Under Armour is aiming to expand its presence abroad, though the company's heavy exposure to the U.S. is for now seen as an advantage over global companies such as Nike that derive more sales and profit from some weaker economies abroad.

Morningstar analyst Paul Swinand said though Under Armour has cleaned up its inventory -- a metric that dropped 2% in the third quarter -- and consumer response to the company's products has been favorable, he is worried about stagnant efforts to expand abroad. International sales were roughly flat at $32 million in the latest quarter.

Mr. Swinand said though Under Armour's new lightweight running shoe called the Spine has been well received and Under Armour is diversifying its portfolio, he believes the company may be spreading itself too thin. Under Armour often touts the strong sales of its yoga pants, but Mr. Swinand isn't convinced the company can compete with Lululemon Athletica Inc. (LULU) and Nike.

Mr. Swinand said he hopes the company will find a core technology that can flourish into a multi-year brand platform, similar to hits Nike and Adidas AG (ADS.XE, ADDYY) have developed over the years.

Overall, Under Armour posted a profit of $57.3 million, or 54 cents a share, up from a profit of $46 million, or 44 cents a share, a year earlier. Revenue rose 24% to $575.2 million.

Analysts had seen earnings of 52 cents a share on revenue of $576.4 million.

Gross margin widened to 48.7% from 48.4%, as lower North American apparel costs helped offset higher footwear costs and an increase in air freight costs.

Growth in the latest quarter was driven by a 37% surge for accessories, primarily led by headwear. Sales of apparel, the biggest top-line contributor, jumped 22% due to broad gains across both genders and the youth line. Footwear sales were up 21%, bolstered by the Spine.

--Anna Prior contributed to this article

Write to John Kell at john.kell@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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