Under Armour: The Year In Review

Under Armour (NYSE:UA) has had a stellar year as far as earnings and revenues go. The company’s footwear business grew significantly on the back its Curry line of shoes. In the year, the company managed to increase its market share, posing a threat to Nike and Adidas. In terms of international business, the sportswear giant witnessed notable growth in China. Management expects the Chinese market to hold immense potential. Furthermore, the company introduced the UA shop app, which has been received well by customers. That said, the company has hinted at slowing growth in its apparel business, due to a slumped apparel market. Here are a few takeaways:

Footwear Business Soared In the Year

The company’s footwear business performed extremely well in the year thus far. The growth is attributed primarily to the success of the UA’s Curry line of shoes. Footwear has been the Under Armour’s fastest growing segments with revenues growing at close to 42% in the latest quarter. The Curry One and Curry Two shoes have completely tipped the scale in the company’s favour, helping it capture large swaths of market share in the basketball footwear market. The shoes have consistently overshadowed all of Nike’s latest innovations in the market for the past few quarters. Despite a slow start for the Curry Three, we expect the footwear business at Under Armour to continue to grow in the mid double digits for the foreseeable future.

Strategic Initiatives To Reach New Customers

CEO Kevin Plank has constantly expressed the need to get the brand increased exposure. He has found that traditional marketing strategies are limited in this regard. He believes that the best way to get people talking about the brand more is through having the company available in as many retail channels as possible. In this respect, within the year, Under Armour partnered with Kohls to bring its products to the latter’s stores starting 2017. This is a major development in the right direction. 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.

The company strives to reach consumers where they “expect” to find its products and deciding the right distribution channel is a critical strategy for future growth. The company already has strong partnerships with department and footwear stores such as Macy’s, Foot Locker and Champs and a strategic expansion of its retail partnerships will ensure wider product availability and expand its consumer base in the long term. It seems possible that Under Armour will continue to engage with such strategic partners going forward.

Increasing Its Mobile Footprint

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. Within the year, the company introduced a new UA shop app which allows shopper to navigate for its products through its “Connected Fitness” platform. Further, it introduced the ability to use 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.

In this direction, the company introduced a new line of “Under Armour Sportswear” developed specifically for the mobile native customer and is predominantly a direct-to-consumer offering. The company’s “Connected Fitness” platform has over 190 million registered users and it continues to grow rapidly. Under Armour’s 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 this year 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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