Earnings Preview: Significant Growth Opportunity In Under Armour’s Womens, International and Footwear Segments

Under Armour (NYSE:UA), a developer and distributor of athletic apparel, footwear, and accessories, is set to report its third quarter earnings on October 22nd. In Q2 2015, Under Armour posted 29% net revenue growth to $784 million. ^[1] The company maintained its solid growth momentum as it achieved its 21st consecutive quarter of over 20% revenue growth.

With the third quarter report, we expect Under Armour’s top line to continue growing as it is only just scratching the surface of its considerable growth opportunities. The company is only in its early phase growing the footwear and women’s sportswear businesses. Additionally, the company is only just beginning to grow its international sales. Below, we discuss these factors in greater detail.

Footwear and International Segments To Drive Growth

While performance apparel is likely to remain the biggest contributor to the company’s revenues for a while, its footwear and international businesses are slowly becoming large enough that their importance cannot be understated. In the previous quarter, Footwear sales grew by 40% to $154 million, owing to strong sales of the CurryOne, the company’s signature shoe line for NBA superstar Stephen Curry. ^[2] Additionally, the company’s running shoes SpeedForm Apollo and Gemini performed admirably and the $125 ClutchFitDrive, a baseball shoe, also showed great momentum. While, the success of the Golden State Warriors, Curry’s NBA team, drove sales in the previous two quarters, leading to such high growth, it remains to be seen if the company can sustain that momentum, either through new shoe launches or through new ways of selling already popular shoes.

For Under Armour, growing its business outside the U.S. is equally important to the company’s near term growth prospects. In 2014, the company nearly doubled its internationals sales, but the overall revenue from international operations still came in below the $300 million mark. ^[2] In the previous quarter, Under Armour’s international revenue grew by a hefty 93% on a year-over-year basis. If you exclude the impact of currency fluctuations, the revenue grew by an even stronger 112%. ^[2] However, the company isn’t resting on its laurels just yet. It is focused on expanding in Europe, Asia and Latin America. In Europe, Under Armour’s focus is on the UK, France and Germany. In Asia, it has now reached distributor agreements in  the South East and has been working on establishing them as well in the Middle East. We will be looking out for reports of progress on these fronts in the earnings call.

Expanding Brand to Appeal To Women

Under Armour’s brand has mostly tried to appeal to men so far. This is reflected not just in its products but also in its choice of brand ambassadors, looks of stores and the channels through which the company reaches its customers.  However, the company is trying to shift its focus towards women. To this end, the company has signed up Gisele Bundchen, Lindsey Vonn and Kristy Copeland as brand ambassadors. It has also expanded its product offerings for women. The company aims to grow the women’s business to around $1 billion by 2016. The company also hired a lot of talent for design and sales of products for this business. We look forward to more detail on how the company is faring in its endeavors in this space.

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1. Under Armour 10-Q, SEC [↩]
2. Ref: 1 [↩] [↩] [↩]