Under Armour Targets Connected Fitness To Continue Its March Forward

Under Armour (NYSE:UA), a developer and distributor of athletic apparel, footwear, and accessories, enjoyed an excellent 2014. Full-year 2014 sales climbed an impressive 32% to cross the $3 billion mark for the first time. The revenue growth was driven by a 30% increase in its core apparel business to $2.3 billion, a 44% jump in footwear to $431 million, and 27% growth in accessories to $275 million. The higher margin direct-to-consumer business saw sales increase 32% for the full year, and now represents 30% of the overall revenue. 2014 International revenues also grew by a staggering 96% compared to 2013’s figure. ^[1]

Despite the astonishing 2014 performance, there are still growth opportunities Under Armour has only begun to target. Below we take a look at those opportunities and analyze what they represent for the company’s future prospects.

Fitness Apps

Under Armour’s CEO Kevin Plank has hinted that the company will soon integrate its fitness initiatives into its store concepts. The company has spent $85 million and $475 million in deals to purchase Endomondo and MyFitnessPal, respectively. Together, the two companies can boast of an amazing 100 million registered users. ^[2] When the company manages to integrate them into its MapMyFitness platform, it will have the biggest digital health and fitness community in the world on its books.

Plank said that roughly 60% of these users are based in North America and notably 72% of those users are women. ^[2] The latter should provide a major boost to the company’s attempts at growing the revenue generated by its women’s business, which received a major fillip following the sponsorship deal with ballet dancer Misty Copeland late last year. ^[3]  With the addition of Endomondo and MapMyFitness Pal to the MapMyFitness platform, Under Armour will have a wealth of valuable information regarding user needs at its disposal. The company can leverage this information for the development and marketing of products in the future.

Connected Fitness

While the apps seem to be Under Armour’s primary focus, the company is also teaming up with HTC to manufacture a new fitness tracking hardware device to support its software services. The device, called The Grip, is a fitness tracker that will be available for sale at a price of $199 later this year. ^[4] The apps will also work with other popular fitness tracking hardware devices such as Fitbit and Jawbone.

Under Armour has always been somewhat of a pioneer when it comes to fitness related technology. Its performance apparel business is built on a technologically superior fabrics that do not absorb sweat when the wearer starts to perspire and become heavy like cotton. However, the retailer has always been targeting a smart apparel option that incorporates electronic functions and data gathering capabilities into the fabric. According to Plank, there will be 50 billion retail items with a connected chip within five years. ^[5] Plank wants the company to be at the forefront of the apparel side of that trend, a leader in apparel that can read biometrics. It is quite likely that the company’s leadership in the performance apparel market and its strong connection with its current user base can help it achieve those targets.

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1. Under Armour’s (UA) CEO Kevin Plank on Q4 2014 Results, Seeking Alpha, February 2015 [↩]
2. Ref: 1 [↩] [↩]
3. Why Gisele Bundchen and Misty Copeland didn’t have a big impact on Under Armour’s apparel sales, Biz Journal, October 2014 [↩]
4. HTC’s Grip is a GPS tracker for the fitness-obsessed, The Verge, March 2015 [↩]
5. Why Under Armour is making a costly bet on connected fitness, Fortune, April 2015 [↩]