Sports apparel manufacturer and retailer Under Armour (UA, Financial) released splendid results for the second quarter. The stock has been impressive on the stock exchange after its first-quarter results, when it outpaced expectations by posting impressive results. Under Armour has kept the momentum going and is showing no signs of fading away. Under Armour’s robust performance was backed by good sales growth, which came in on the back of strong sales in categories such as running, golf, training and women’s apparel.
Having seen strong growth in sales, management has raised the sales guidance. In the recently reported quarter, Under Armour reported a solid 34.1% growth in its revenue, clocking $609.7 million. This was better than $455 million as compared to last year’s same quarter. The company has exceeded its guidance for the coming quarter, and is now expecting its revenue to clock between $2.98 billion-$2.91 billion.
The products are selling well
The company is in a strong position as it is seeing good traction for its footwear products. It is seeing good sales across almost every segment. It is making advances to grow its sales further. Besides this, Under Armour is also undertaking various marketing strategies to bring in more customers to drive its sales. Under Armour is seeing some potential markets overseas, so it is also making efforts to expand to markets such as the Philippines and Singapore.
There are five pieces of Under Armour’s business – Footwear, Women's, Connected Fitness, Direct-to-Consumer and International. These are the primary growth drivers for the company. Under Armour is focusing on strengthening these drivers, and for this, it is making aggressive investments.
Under Armor is seeing good opportunities in the footwear category with the success of SpeedForm Apollo running shoes. In this category, Under Armour is launching its next shoe, namely SpeedForm Gemini, which is expected to grab market share in the category from 2015 after its launch.
Innovation-focused moves
Moving on, Under Armour is making innovation in its products to make them more competitive and fulfill the expectations of the athlete to make it make itself more preferable. It is mainly making innovation in its SpeedForm and Highlight shoes.
Under Armour is also focusing on the women’s segment, as it sees great opportunities in this area due to the many activities that women are engaged in. Under Armour is aiming to provide the best in class products in these categories to generate more traction in the women’s segment. In addition, to promote this, Under Armour has also undertaken a promotion campaign, which is expected to help Under Armour improve its growth story.
Under Armour is also enjoying good sales in its wholesale business. To retain and to improve the customer base, it is strengthening the direct-to-consumer business. This brings an opportunity to gain new consumers, and can be one of the growth drivers for Under Armour.
Conclusion
But if we look at the valuation, Under Armour is expensive with a trailing P/E of 92.62. But a forward P/E of 59.27 shows handsome earnings growth in the future. In addition, it is seeing robust growth in its sales, which makes it well-positioned to deliver good results in the long term as well. So, looking at this valuation, investors should not mind paying a heavy premium as the company can do better in the future.
