Under Armour’s (UA, Financial) growth story has been fantastic. The company has consistently reported double-digit revenue growth and has impressed investors. What’s more impressive is that the company doesn’t have a big global presence yet and has a lot of room to grow. Under Armour’s growth looks likely to continue as I expect the company’s strategies to pay off in the near future.
There’s no company that can dethrone Nike (NKE, Financial) from its perch atop athletic gears. However, if I was forced to bet on a company that would, it would be Under Armour. The company is growing rapidly and is a major competitor in athletic clothing and has had an exciting launch in the shoe business, where it ventured just a few years ago.
On the other hand, investors may also be aware of Under Armour's booming app business: a turf where the company has invested hundreds of millions of dollars to become a trailblazer. Over the last two years, Under Armour has bought three apps for $710 million:
- MapMyFitness
- My Fitness Pal
- Endomondo
The company’s apps are now a go-to for tracing everything from your workouts to what you're eating. Doubtlessly, the company will also provide these apps to new devices like the Apple (AAPL, Financial) Watch. With Apple watches expected to sell millions of units, I think Under Armour’s app investment will pay off soon.
Why Stephen Curry is important
A player’s popularity plays a vital role for any apparel company. Youngsters and other basketball amateurs purchasing the sneakers need to identify the player behind the shoes, which is why the player's popularity is so significant, and it's why legends like Michael Jordan, who has his own "Jumpman" logo, can endure selling shoes more than a decade into his withdrawal.
Nike has played an important role in creating an art of sneaker branding, selling about $80 million of unique Jordan model in one week of December 2014. There is a very less stock; therefore resale market for Jordans is also valuable. The Jordans fans and resellers can be found waiting outside of sporting goods stores. Basketball shoes acts as a diamond for their fans.
Luckily for Under Armour, Stephen Curry, the Warriors' point guard is one of the many likable players to smash the hardwood in current years. Curry is highly marketable and this is good for Under Armour. His jerseys were the # 2 seller in the league and achieved top votes for this year's All-Star game.
Sales growth will continue
One of the major factors that will govern if Under Armour's current valuation can be keep up is the company's skill to expand internationally. In the latest quarter, Under Armour produced 12% of its total revenue from international sales while Nike generated 53% of its Nike brand revenue overseas, and Lululemon (LULU, Financial) is still chiefly an international growth story.
Conclusion
There are two fundamental pieces to Under Armour's international growth that stockholders need to keep an eye on. First, the company’s international sales should carry on becoming a larger and larger part of the company's overall revenue. With international sales growing at 74%, associated to the company's overall sales growth of 27% excluding currency, this trend recommends international will turn out to be a bigger part of the entire over time.
And second is the company’s branding initiatives. Good branding strategy is the key to growth for any sportswear company and while signing Stephen Curry was a great move, Under Armour has to build up on it and look for more likeable sportsman across various fields so as to boost sales. As long as Under Armour keeps international growth intact and signing new marketable sportspersons, it will continue its upward trajectory.
