Shares of the leading athletic retailer of apparels and footwear, Under Armour (UA, Financial), surged an impressive 39% in the last one year. The company has been performing pretty well from the last few quarters, owing to its efforts to grow and attract customers as much as possible. Its fourth quarter results were also impressive, wherein the numbers were ahead of the Street’s estimate. This resulted in a sharp increase in its share price.
A snapshot of the quarter
Revenue grew 31% to $895 million, over last year’s quarter. This was much higher than the analysts’ estimate of $848 million. Higher demand for its innovative products enabled the company to register growth in its top line. Apparels, which make 70% of the total revenue, surged 30% in the last one year. This growth was driven by strong demand for products such as Charged Cotton, ColdGear Infrared products as well as Strom.
Revenue from accessories also grew a healthy 27%, clocking in at $275 million. Higher sales of new items, such as the gloves and head wears, led to higher revenue. The footwear category also grew 44% during the period and was primarily driven by strength in the running category. New products such as the SpeedForm Apollo became very popular among customers. Even baseball shoe, ClutchFitDrive, resonated well with the customers.
The International division too performed well with sales growing 96% in the last one year. Hence, the company plans to expand its international operations. It will be expanding its presence in Europe, Asia and Australia.
Margins improved 140 basis points to 50.1%, over last year. Earnings for the quarter grew 37% to $0.40 per share, as compared to the previous year. The bottom line was a penny higher than the estimate of $0.39 per share.
The key drivers
Some of the key drivers of Under Armour’s results were, its focus on product innovation, expansion of direct-to-consumer business, and its growing focus on technology based fitness business. Also, growth in the wearables market is helping the company grow.
Its strategic efforts to attract customers have been commendable. It plans to expand internationally and translating its website in many more languages, will help in catering to a diverse market. It has also strengthened its ad efforts. For instance, the “I Will What I Want” campaign, which was aimed at women, became very popular.
Furthermore, it plans to acquire MyFitnessPal and Endomondo. MyFitnessPal makes apps such as the calorie counting and fitness tracking app. Endomondo provides health and wellness tracking service. These acquisitions are in addition to the acquisition of MapMyFitness in December 2013. Thus, the athletic retailer plans to grow its digital health community by manifolds, through such acquisitions. In fact, the digital health community of the company has grown to 120 million users in the quarter.
My take
Overall, Under Armour is one of the finest picks one could add to its portfolio. Its efforts to grow its business through expansion and to lure female customers through promotions seem to be successful. In fact, the female business is estimated to grow to $1 billion in 2016, leading to a higher top line. Moreover, the two new acquisitions will add to its growth. Hence, this retailer is definitely a lucrative pick.
