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Under Armour Is Primed for a Perfect Future
Posted by: Mrinalini Chaudhuri (IP Logged)
Date: March 28, 2014 10:14AM
Under Armour Inc. (UA) is engaged in the development, marketing and distribution of apparel, footwear and accessories for men, women and youth. The company’s products are sold worldwide and are worn by athletes at all levels, from youth to professional, on playing fields worldwide.
Most of its products are sold in North America. Internationally, Under Armour sells its products in certain countries in Europe. The company’s product offerings consist of apparel, footwear and accessories for men, women and youth.
What the Company Is Presently Going Through
In the fourth quarter, Under Armour's net income rose 28%, driven by strong sales of running shoes, fleece, and winter-wear items. Revenue rose 35% to $683 million, comprehensively beating the analyst consensus of $620 million. The company's sales were helped by demand for its football workout shirts, shoes, and sports equipment. Looking ahead, Under Armour expects to gain market share from its more established rivals on the back of strategic tie-ups and innovative products.
Apart from introducing new products and increasing sports sponsorships, Under Armour is also making technological advancements in its product offerings. Recently, the company partnered with Lockheed Martin Corporation (LMT) which specializes in defense, security, and aerospace technology. Along with Lockheed Martin, Under Armour has poured millions of dollars into a project aimed at making a big presence at the Winter Olympics in February 2014.
Staying Ahead of Its Competitors
Despite being roughly the same size, Under Armour has more than three times the amount of fans on Facebook Inc. (FB) that Lululemon (LULU) has. The former has more than 2.7 million fans, while the latter has just 891,000. Under Armour's market capitalization is $9.2 billion and Lululemon's market capitalization is $8.5 billion.
The company is capitalizing on this growing trend by offering highly technical activewear products for men, women and youth. It is emerging as a big player in the sports apparel industry, and is giving stiff competition to its peers such as Nike (NKE), Lululemon and Adidas (ADDYY). During the holiday season, Under Armour was able to increase its apparel sales by 34% which was more than that of Nike, Adidas and Lululemon. While Nike experienced a 12% rise in apparel sales, Adidas witnessed a decrease in sales. On the other hand, Lululemon reported a 7.4% decline in quarter-to-date holiday season same store sales. Under Armour's highly promoted fleece line was the major contributing factor towards the better holiday season. Moreover, it was much more aggressive with its promotional activities as compared to the last year.
Shining 2014 on Its Way
Looking ahead, Under Armour has numerous strategies under its belt that should help it to sustain its athletic performance. Under Armour's fitness segment is also seeing rapid growth, driven by innovations in online health tracking. The company purchased MapMyFitness, one of the world's largest open technology platforms for fitness tracking, leading to expansion in digital-fitness tracking. Since the world is more connected nowadays, this move from Under Armour will allow its customers to track their fitness effectively.
The success of this acquisition is evident from the fact that in the first week of January, the company added 400,000 new users. MapMyFitness has an existing community of more than 21 million users, so Under Armour has a huge market to explore through this acquisition.
Under Armour's focus on innovation has backed the company's solid growth so far. There's no doubt that the competition in this market is very tough, but Under Armour has been able to make its mark. Expected earnings growth of 23.4% over the next five years is proof of Under Armour's bright prospects.
Moreover, Under Armour is increasingly focusing on female customers, who are increasingly wearing athletic apparel outside of the gym and making it a style statement. The company expects this trend to continue in the future as well.
To Sum Up
The maker of athletic apparel, footwear and accessories has excelled on numerous fronts in recent years. However, the company's robust growth is derived directly from the immense strength of the Under Armour brand itself, which has proven more universally appealing than the brands of industry rivals like Lululemon Athletica.
With international growth and more products in the pipeline, the company should be able to perform well in the future. Currently, Under Armour is still growing rapidly and looks like it will continue this trend for the foreseeable future. With this alone, shareholders should be relatively comfortable with the stock.
Stocks Discussed: UA, LMT, NKE, LULU, ADDYY,
Re Under Armour Is Primed for a Perfect Future
Posted by: Dr. Paul Price (IP Logged)
Date: March 28, 2014 01:39PM
You never said what you think UA is worth.
Stocks Discussed: UA, LMT, NKE, LULU, ADDYY,