Comfort is the main criterion for an athlete before choosing any apparel. So, the athletic-apparel giants are constantly innovating more and more new products to create a niche in customers’ hearts. Founded in 1996 by Kevin Plank, Under Armour Inc. (NYSE:UA) is an American sports clothing and accessories company. This Baltimore-based company develops sportswear, casual apparel, footwear and a number of sport accessories. Under Armour is having its European headquarters in Amsterdam and other additional controlling centres are in Toronto, China, Hong Kong and in Guangzhou, China. The company also sponsors a number of high-level and profession athletes.
Over 90% of the company's revenue is generated from North America, and this creates a huge opportunity for Under Armour to become a global brand. During the last 15 quarters, the company has recorded over 20% growth, with 35% top-line growth. The company’s shares are rallying by 72% as it continues to take share from Nike (NYSE:NKE).
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- UA 15-Year Financial Data
- The intrinsic value of UA
- Peter Lynch Chart of UA
A table is provided below to show the fourth quarter's financial report (declared on Jan. 30, 2014) compared to the prior year’s quarter.
Under Armour’s Direct-to-Consumer net revenues, which represented 39% of total net revenues for the fourth quarter, grew 36% year-over-year. Company’s apparel net revenues increased due to expanded Fleece offerings, and new ColdGear Infrared products. Gains in running helped to increase footwear net revenues. Accessories net revenues increased primarily due to headwear and gloves. Gross margin is primarily driven by the strength of the Brand contributing to a favorable sales mix. Selling, general and administrative expenses as a percentage of net revenues increased mainly due to higher incentive compensation costs.
Under Armour expects 2014 net revenues in the range of $2.84 billion to $2.87 billion, and 2014 operating income in the range of $326 million to $329 million. Compared to an effective tax rate of 37.8% for 2013, the company expects an effective tax rate of approximately 39.0% for the full year. Expected fully diluted weighted average shares outstanding will be of approximately 109 million to 110 million in 2014.
Under Armour is expanding its wings in the international markets, and as I have said earlier, it has begun to open stores in China, a major consumer of athletic gear. The apparel giant has found success by being the technology apparel company. With innovative fabrics and synthetics, it has made products that are lighter, can drive away the water without restricting airflow, cotton that dries like synthetic fibre, and many more. Recently, the company has announced the acquisition of MapMyFitness (for $150 million), the fitness technology company powering one of the world's largest digital fitness communities. This acquisition has boosted up the company’s innovative technology. Under Armour also partnered with Lockheed Martin to design the fastest, most aerodynamic suit ever.
During the fourth quarter, international sales of Under Armour are only $37 million, a small 5% of total revenues. On the other hand, Nike generates over 55% of sales from global markets. So, Under Armour is also gearing up to increase its international sales. The company is also planning to increase its women's apparel sales. For this, Under Armour has increased its concentration in new sports bras and other products geared towards women. Further, the company partnered with the University of Notre Dame, the U.S. Naval Academy, and the Colo Colo fútbol team in Chile for making their outfit.
Chart courtesy: nasdaq.com
Under Armour has huge revenue growth followed by strong financial position. It has also an impressive record of earnings per share growth, compelling growth in net income, and solid stock price performance. Other strengths include fairly high P/E ratio and strong international markets. The company is making several efforts to strengthen its international position. With this momentum Under Armour will increase its revenue growth in the next few years. Under Armour CEO Kevin Plank is also confident that the company will continue to deliver future growth. I am therefore pretty bullish that this athletic-apparel giant will not disappoint its valued customers as well as investors in the near future.