Here Are The Key Growth Drivers For Under Armour

Because the endorsement from NBA MVP Steph Curry drives significant revenue growth for Under Armour‘s (NYSE:UA) basketball shoes, experts believe that the company is proving to be a growing threat to industry leader Nike. According to our estimates, the footwear segment accounts for nearly 30% of Under Armour’s valuation and we expect revenues in this segment to continue growing steadily over our forecast period. We believe strategic retail partnerships (the most recent being the one with Kohls) will be critical in driving growth for the company in the long term.  They enable the company to reach out to newer customers.  As it continues focus on its online offering, e-commerce will be another growth driver for the company, even as it works to create a convenient mobile shopping experience as well.  Under-penetrated international markets could be another growth driver for Under Armour over the long term, especially where its brands are well received. Of particular note is China, where the market size is expected to grow, given the recent push by the government.

Strategic Initiatives To Reach New Customers

Under Armour recently partnered with Kohls to bring its products to the latter’s stores starting 2017. Kohl is a top retailer of active wear with a large and loyal consumer base of women shoppers and Under Armour will get access to these consumers via the recent partnership. We believe the company strives to reach consumers where they “expect” to find its products and deciding the right distribution channel will be critical for its growth in future. The company already has strong partnerships with departmental stores such as Macy’s, Foot Locker and Champs and we believe a strategic expansion of its retail partnerships will ensure wider product availability and expand its consumer base in the long term.

E-Commerce and M-Commerce

As an increasing number of users spend more time on their mobile devices, especially on apps, Under Armour is looking to improve its mobile shopping experience,  We believe this will be a key growth driver for the company in the long term. It recently introduced a new UA shop app which allows shopper to navigate for its products through its “Connected Fitness” platform. The company is also using data to refine and recommend products based on the customer’s activities and expects this to increase the transaction size and volumes on its shopping app. The company’s new line of “Under Armour Sportswear” is being developed for the mobile native customer and is predominantly a direct-to-consumer offering. The company’s “Connected Fitness” platform has over 175 million registered users continues to grow rapidly. We believe online initiatives will drive growth of the direct to consumer channel and mobile commerce will be a key driver of revenues in the long term.

Growth In China

Greater China has been a revenue driver for Under Armour and we expect this region to continue to drive growth for the company. The company expects China to be a billion dollar plus opportunity for its brand as the Chinese market grows due to regulatory initiatives. Recently the Chinese cabinet unveiled a blueprint to develop a 5 trillion yuan domestic sports industry by 2025 — more than tripling the current size of the market — with ramped up sports facilities and looser industry regulation. We believe this will be a key revenue driver for Under Armour in future, given that the company already has a strong presence in the country.

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