UPDATE 3-Under Armour inventory spike hits shares
* Q1 EPS $0.23 cents vs $0.19 expected
* Q1 sales up 36 pct to $312.7 mln
* Shares down more than 8 pct (Rewrites first paragraph, adds shares, analyst quotes)
NEW YORK, April 26 (Reuters) - Athletic apparel maker Under Armour Inc (UA.N) reported a spike in inventory on Tuesday, sending its shares down more than 8 percent as investors worried that it was more at risk of having to cut prices if sales faltered.
The company, known for apparel that draws sweat away from the body, said inventory rose 68 percent at the end of the quarter to $248.6 million.
A strategic decision to stockpile cold-weather products early in order to avoid rising costs in the second half of the year accounts for at least some of the inventory increase, said Morningstar analyst Paul Swinand.
"It's always risky to take on inventory," he said. "Investors instinctively hate that."
Under Armour forecast 2011 operating income of $149 million to $153 million on revenue of $1.37 billion to $1.39 billion.
"The demand side of the equation remains healthy," said Wedbush Securities analyst Camilo Lyon.
Under Armour is riding a surge of demand for its sweat-wicking clothes because its marketing, cuts and fits are projecting an edgier vibe than that of rivals like Nike Inc (NKE.N), Swinand said.
Under Armour posted first-quarter net income of $12.1 million, or 23 cents per share, compared with $7.2 million, or 14 cents per share, a year earlier.
Analysts on average had expected earnings of 19 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose 36 percent to $312.7 million.
Gross margin fell slightly to 46.4 percent from 46.9 percent a year earlier, due in part to a rise in fuel prices that is making transportation and production more expensive, Lyon said.
Under Armour's shares were down 8.5 percent at $71.80 during morning trading on the New York Stock Exchange. (Reporting by Helen Chernikoff; Editing by Derek Caney, Lisa Von Ahn, Dave Zimmerman)