Under Armour, Inc. ( UA - Snapshot Report ) , one of the leading developers, marketers and distributors of branded sports apparel, footwear and accessories, recently posted better-than-expected third-quarter 2011 results. The outperformance came on the heels of healthy apparel, footwear, accessories and direct-to-consumer businesses, which encouraged management to provide an upbeat outlook.

The quarterly earnings of 88 cents a share soared 29.4% from 68 cents earned in the prior-year quarter. The quarterly earnings included a gain of 4 cents due tax planning strategies undertaken by the company. Excluding this benefit, earnings came in at 84 cents. The Zacks Consensus Estimate for the quarter was 83 cents.

Under Armour’s net revenue for the quarter came in at $465.5 million, up 41.7% from the year-ago quarter, and surpassed the Zacks Consensus Estimate of $445 million.

Let’s Dig Deep

The double-digit jump in top-line was driven by an increase of 31.3% in apparel net revenue to $363.4 million, reflecting growth across men’s, women’s and youth apparel businesses, and strength witnessed at Charged Cotton apparel and Fleece.

Footwear net revenue soared 96.7% to $52 million. Under Armour remains optimistic about strong market for footwear products.

Accessories net revenue rose to $39.7 million from $12.8 million in the year-ago quarter on account of switching licensed hats and bags business to in-house, beginning January 2011. Licensing revenue plunged 17.8% to $10.4 million.

Baltimore, Maryland-based company, Under Armour, said that direct-to-consumer net revenue surged 73% during the quarter, and now represents 22% of total revenue. Under Armour opened 4 new Factory House stores during the quarter under review, increasing the store count to 76. The company expects to open 4 more Factory House stores during the fourth quarter bringing the total count to 80 at the end of fiscal 2011.

For fiscal 2012, management expects Factory House store growth between 20% and 25%.

Despite a 49.1% increase in cost of goods sold, gross profit jumped 34.5% to $225.1 million, whereas gross profit margin contracted 250 basis points to 48.4%, reflecting lower margins from apparel product business and switching of licensed hats and bags business to in-house. Operating income surged 32.2% to $75 million, whereas operating margin shriveled 120 basis points to 16.1%.

Other Financial Details

Under Armour ended the quarter with cash and cash equivalents of $67.9 million, total long-term debt of $79.5 million and shareholders’ equity of $592.1 million. The increase of $61 million in the long-term debt from the prior-year quarter reflects the acquisition of corporate headquarters in July. The company had borrowings of $30 million under its revolving credit facility of $300 million at the end of the quarter.

Capital expenditures were approximately $13 million for the quarter under review. Management now anticipates fiscal 2011 capital expenditures between $50 million and $53 million. Earlier, management had hinted that capital expenditures would be at the high end of the guidance range of $45 million to $50 million.

Management’s Upbeat Guidance

Better-than-expected results, sustained growth in the apparel category and direct-to-consumer channel, and improved outlook for the remaining year, buoyed management to raise fiscal 2011 guidance.

Under Armour now expects fiscal 2011 net revenue between $1,460 million and $1,470 million, representing an increase of 37% to 38%, and operating income between $159 million and $162 million, reflecting a growth of 42% to 44% over the prior-year.

Earlier, Under Armour had forecast fiscal 2011 net revenue between $1,420 million and $1,440 million, representing an increase of 33% to 35%, and operating income between $155 million and $160 million, reflecting a growth of 38% to 42% over the prior-year.

Management also provided initial outlook for fiscal 2012, and indicated that it expects revenue and operating growth to achieve the higher end of the long-term guidance range of 20% to 25%.

Currently, Under Armour, which competes with Nike Inc. ( NKE - Analyst Report ) and Columbia Sportswear Company ( COLM - Snapshot Report ) , holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating.