Comfort is the main criterion for an athlete before choosing any apparel. Athletic-apparel giants are therefore constantly innovating more and more new products to create a niche in customers’ hearts. Founded in 1996 by Kevin Plank, Under Armour Inc. (UA, Financial) 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 professional athletes.
Going By the Numbers
By any measure, the first-quarter results posted by Under Armour were incredible. Quarterly revenue rose 36% year over year to $642 million, handily exceeding expectations for sales of $598.81 million. More specifically, Under Armour's apparel revenue increased 33% to $459 million, footwear sales rose 41% to $114 million, and accessories increased 43% to $52 million.
Higher-margin direct-to-consumer revenue grew 33% during the same period — and now represents 26% of all sales. Under Armour's global ramp-up is just beginning, with international sales rising 79% during the same year-ago period to comprise 9% of total first-quarter revenue.
Competition Faced
In terms of growth, there may not be a better performing company in the retail segment than Under Armour. 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 (LULU, Financial).
Social media can be an effective way to gauge brand popularity. In the case of Under Armour versus Lululemon, the comparison is especially valuable because the companies are approximately the same size; Under Armour's market capitalization is $9.2 billion and Lululemon's market capitalization is $8.5 billion.
Despite being roughly the same size, Under Armour has more than three times the amount of fans on Facebook (FB, Financial) that Lululemon has. The former has more than 2.7 million fans, while the latter has just and 891,000.
Targeting Female Athletes
Under Armour has a more diverse product lineup that appeals to a much broader audience. While the company's brand originally catered primarily to male athletes in sports like football, Under Armour management has made great strides in targeting female athletes as well as youth in recent years.
Under Armour has embarked on a campaign called "What's Beautiful," which has targeted female athletes through various print, television and social-media advertisements over the last year. The strategy focused on consumer engagement and allowed fans to post their workout routines and progress online. The company has also introduced new female product lines and redesigned a number of stores with female shoppers in mind.
Currently, growth in Under Armour's female apparel is outpacing the company's overall growth and indicates that management's efforts have been very successful. Chief executive officer Kevin Plank is anticipating that Under Armour's female businesses will make up $1 billion in revenue by 2016.
The diversification strategy has been so successful that Plank explained during a recent investor conference call, "Women's has the potential to be larger than men's."
Growth Prospects
Under Armour has the most room for growth and is the best long-term growth play. Under Armour has the brand strength and management team to make the company a worldwide leader in athletic apparel and footwear. All that is necessary for the company to succeed is to translate its immense brand strength into other product segments and geographic areas. Luckily, management at Under Armour has already shown that it is capable of doing this. Despite a fantastic 2013, Under Armour should still shine in 2014.
Meanwhile, in China, Under Armour is expected to have roughly twenty stores by the end of April and a total of fifty in the pipeline for the rest of the year. Through this expansionary move, the organization will increase its presence in China from two cities to ten.
Additionally, Under Armour also made a debut in Chile and Brazil earlier on during the year, and its growth in South America was supplemented after it took full control of a distributor in Mexico that used to be a subsidiary of theirs.
Towards the end of 2014, Under Armour aspires to initiate the distribution in markets that they had not explored before, such as the Middle East and South-east Asia.International business has always been one of their key sources of revenue, in addition to their running footwear and apparel categories.
Apart from introducing new products and increasing sports sponsorships, Under Armour is also making technological advancements in its product offerings.
To End
Nowadays, activewear is becoming a hot fashion statement and is gaining acceptance as a wearable attire at almost every thinkable venue, including some offices. Under Armour 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.
Under Armour has huge revenue growth followed by strong financial position. It also has an impressive record of earnings per share growth, compelling growth in net income, and solid stock price performance. Under Armour shows all the potential to continue as a growth stock. It also has its plan intact for the Winter Olympics and is making consistent improvements in its technology. This will help Under Armour to get more sports contracts in future.
