Comfort is the main criterion for an athlete when choosing workout apparel. Athletic apparel giants are, therefore, constantly innovating new products to create a niche with customers. 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 has its European headquarters in Amsterdam and other additional controlling centers in Canada, Hong Kong and in Guangzhou, China. The company also sponsors a number of high-level and professional athletes.
The company has a strong historical performance and is constantly building on its reputation. Under Armour reported incredible third-quarter results in 2015 with revenues increasing in several departments. Under Armour has plenty of room to grow and is in a better position to offer increased shareholder returns. There is a lot of potential in this company.
Strong third quarter
Net revenue increased 28% in the third quarter of 2015 and was $1.20 billion, up from $938 million in the prior year quarter. On a currency neutral basis, net revenues increased 31% compared with the prior year's period.
Net income increased by 13% during the third quarter of 2015 and was $100 million, up from $89 million in the prior year quarter.
Diluted EPS for the third quarter was 45 cents compared to 41 cents in the prior year quarter.
Gross margin for the third quarter was 48.8%, slightly down from 49.6% in the year-ago quarter.
Selling, general and administrative expenses as a percentage of net revenues was 34.6%.
Third quarter operating income increased by 17% and was $171 million, up from $146 million in the prior year quarter.
Outlook
The company expects the following:
- Based on current visibility, Under Armour expects 2015 net revenues of approximately $3.91 billion representing growth of 27% over 2014.
- It expects operating income to be around $408 million, representing growth of 15% over 2014.
Expectations
The company is currently working on increasing the number of stores throughout the world. It is gaining fast results in international markets. It opened a 30,000 square foot Brand House store on the Magnificent Mile in Chicago, while also debuting in Brazil and the Middle East, which contributed to the 74% international growth for the quarter.
The health and wellness segments are growing quickly, and Under Armour has more room to grow in these sectors. The company plans to take women’s business to around $1 billion by the end of 2016.Â
The company is concentrating its focus on areas that are key to long-term sustainable growth. At the same time, it is increasing focus on developing sustainable business process improvements and better connecting the components of the value chain to more fully capitalize on the brand's momentum going forward. The company is targeting $7.5 billion in net revenues by 2018.
Conclusion
Activewear is becoming a hot fashion statement. The wearables market is expected to be at $6 billion by the end of 2016. 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.
With its Connected Fitness community now totalling more than 140 million unique registered users and adding on average more than 100,000 new athletes each day, it is still uncovering the potential of what the world's largest digital health and fitness community can do to build consumer engagement and drive healthier lifestyles.
Under Armour has huge revenue growth, followed by a strong financial position. It also has an impressive record of EPS growth, compelling growth in net income and solid stock price performance. Through the acquisitions of Endomondo and MyFitnessPal, combined with the company's existing MapMyFitness community, it created the world's largest digital health and fitness community with over 120 million unique registered users. Under Armour has always been a great stock and though it is expensive when compared to its peers, it has still more room to grow in the near future.
Disclosure: I do not hold any position in the company.
