Under Armour, Inc. UA, a leading developer, marketer and distributor of branded performance products, has been focusing on global expansion, brand development and product innovation for quite some time now.
Under Armour continues to seek opportunities to widen its global footprint and market share. In this regard, the company has expanded its factory and brand store network in Canada and China while offering franchise licenses across many countries over the past few years. The company is also entering into deals with athletes like basketball star Stephen Curry and golfer Jordan Spieth, to enhance brand recognition and gain a competitive edge.
Moreover, in order to capitalize on the increasing consciousness about fitness among people, Under Armour has entered the fitness gadgets and tracking tools market. The recent acquisitions of Endomondo and MyFitnessPal mark the company’s efforts to boost digital capabilities.
Additionally, over the past few years, Under Armour has been trying to boost its direct-to-consumer (DTC) business (offering merchandise via network of brand and factory house stores and its website and catalogs) through store expansion initiatives and enhancement of its e-Commerce platform. This strategy has increased DTC’s contribution to total revenue from 6% in 2005 to 30% in 2014.
We are impressed by Under Armour’s strong performance in every quarter. The company has been consistently recording revenue growth of over 20% for the past 22 quarters and in the recently concluded quarter, revenues jumped 28.4% year over year. Management now projects net revenue of $3.91 billion for 2015, as against $3.84 billion projected earlier, reflecting 27% growth from 2014.
However, management cautioned that weakening of foreign currencies against the U.S. dollar and costs related to recent buyouts (Endomondo & MyFitnessPal) may keep margins under pressure.
Also, Under Armour faces intense competition in the sporting goods industry from other major players on several attributes such as style, price, quality, comfort and brand name. Competitors such as NIKE, Inc. NKE and Adidas ADDYY have significant financial, technological, engineering, manufacturing, marketing and distribution advantages that may dent Under Armour’s sales and margins.
Zacks Rank
Under Armour currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Hanesbrands Inc. HBI carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment