|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
Is Under Armour A Good Long-Term Performer?
Posted by: rusticnomad (IP Logged)
Date: April 6, 2014 03:52AM
Under Armour (UA) reported solid results in the fourth quarter, and it seems that it is continuing the same pace. The stock has increased more than 30% in the first three months of 2014, and after the results, its performing even better. In spite of tough competition from its peers such as Nike (NKE) and Adidas, under Armour has performed well. It has various strategies under its sleeve, which might work well for the company. Let us have a detailed look at its future prospects.
A look at the performance
Revenue for the fourth quarter rose 35% to $683 million, beating the analyst estimate of $620 million. Net income rose 28%, led by strong sales of running shoes, fleece, and winter wear items. Other items, which added to the sales numbers, include football workout shirts, shoes, and sports equipments. Under Armour has recently made some strategic tie-ups, which might help the retailer to gain market share from its more established rivals.
The company has entered in a partnership to design outfits for two of the most prestigious collegiate sports programs in the U.S. Along with that it has also signed agreements to design jerseys for soccer clubs Colo Colo and Cruz Azul, and outfits for American ballerina Misty Copeland.
Catalysts to note
Under Armour’s fitness segment is also performing well, led by innovations in online health tracking. The company has acquired MapMyFitness, which is one of the world’s largest open fitness tracking platforms that enabled the firm to expand in digital fitness tracking. This will allow its customers to track their fitness effectively. MapMyFitness already has more than 21 million users and to top that another 400,000 new users were added in the first week of January after acquisition. Realizing the immense potential of this acquisition Under Armour is working hard to tap the huge market.
The retailer has made some innovations in its apparel’s assortment by introducing its latest ColdGear infrared technology, which proved to be a key reason for growth. With ColdGear athletes can keep themselves warm in a light weight outfit during cold weather. This feature has caught the attention of its prospective customers, and the company expects to boost in its sales numbers in 2014 with ColdGear. Moreover it plans to bring improvised version of the existing ColdGear, which has contributed $300 million in combined revenue in 2013 since its launch three years ago.
Under Armour is also increasing its focus on female sports gear, as wearing athletic apparel outside the gym is seen as the next trend and looking forward the company anticipates this trend to continue. Under Armour’s latest product, SpeedForm shoe is expected to gain good traction this year. In the wake of stiff competition the Company is focusing on the shoe’s light weight characteristics, precise fitting and construction to increase its market share.
With all the new launches in place Under Armour seems as an unmovable rock. However, it has to face tough competition from Nike in the U.S. Nike is launching a new range of shoes for different segments this year. It is also working on the development of self-lacing shoes, which are expected to hit the market by 2015. In Europe such moves have helped Nike to capture market share from Adidas. According to Euromonitor, in 2012, Adidas commanded 13.2% share of the western European sporting goods market, while Nike stood at 12.4%. However, Nike reported an increment of 8% in sales in Western Europe in the first quarter of fiscal 2014, while Adidas reported a decline of 6% in its latest quarter.
But it would be a matter of time before Under Armour breaks the dominance of Adidas and Nike. With the world cup fever on, Nike and Adidas are preparing to tap the market, with Adidas being the official partner of the event while Nike sponsors the crowd favorite Brazil. In fact, both Adidas and Nike sponsor some of the top teams which might the title, while Under Armour not even in the race
Under Armour has focused on innovation, which has led the company’s solid growth so far. Although the competition is tough but Under Armour has made its mark in the past and the company is optimistic for future. Looking forward, analysts expect earnings growth of 23.45% over the next five years, making it a good investment.
Stocks Discussed: UA, NKE,