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 has 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.
What the numbers say
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 rampup is just beginning, with international sales rising 79% during the same year-ago period to comprise 9% of total first-quarter revenue. It has already captured the international market since there is a rise of 79% in the international business segment.
The company reported second-quarter earnings on July 24, 2014. The Footwear segment reported a growth of 34% in the second quarter. UA acquired MapMyFitness in 2013 and as of March 2014, there were 22 million registered users with 200000 new users being added to in each week. Second Quarter Net Revenues increased 34% to $610 Million. The company raised 2014 Net Revenues Outlook to a range of $2.98 Billion to $3.0 Billion from $2.88 Billion to $2.91 Billion.
Second-quarter apparel net revenues increased 35% to $420 million compared with $310 million in the same period of the prior year, driven by expanded offerings in categories such as golf, outdoor, running, training and women's studio. Second quarter footwear net revenues increased 34% to $110 million from $82 million in the prior year's period, led by new introductions in running. Second-quarter accessories' net revenues increased 18% to $60 million from $51 million in the prior year's period, primarily driven by headwear. Direct-to-Consumer net revenues, which represented 31% of total net revenues for the second quarter, grew 38% year-over-year. (Source: Company’s Website).
Launch of women’s ad campaign
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. UA launched new 60 second ad that targeted the women section. The ad ends with the tagline "I Will What I Want." Women’s business comprises of around 30% of apparel sales of UA. UA now is targeting to further grow its $500 million women’s business and is trying to cater to more and more women consumers. We are excited about the timing because of the growth we're seeing in the women's business," Leanne Fremar, a senior vice president and executive creative director for Under Armour Women's, said in an interview.
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.
Future Outlook
International segment comprises about 6% of the total sales of UA. UA is currently trying to raise this to 12% by the end of 2016. It is planning to get into a partnership with U.S. speedskating team and U.S. gymnastics teams which will add to its worldwide exposure for sure. The company is currently working on increasing the number of stores throughout the world. 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 Southeast 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. 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.
Kevin Plank, chairman and CEO of Under Armour, Inc., stated, "The broad-based momentum that we have been experiencing recently showed no signs of stopping during the second quarter. While we continued to add more dimension to our largest growth driver in Apparel, we were particularly encouraged by the brand response we are seeing in both our Footwear and International businesses. From our latest pinnacle football cleat, the Highlight ClutchFit, to the successful SpeedForm running initiative, our footwear is clearly resonating with consumers, and we are well positioned to expand these platforms in the seasons ahead. In International, we are executing in all regions and are proud of key second-quarter milestones such as our initial product launch in Brasil and partnering with key distributors to open the first brand house stores in Panama, the Philippines and Singapore."
Final thoughts
Nowadays, activewear is becoming a hot fashion statement and is gaining acceptance as a wearable attire at almost every thinkable venue, including some offices. 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.
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. UA 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.
