Under Armour's 18th Consecutive Lucrative Quarter

by: Javelin

Summary

Lately, Under Armour (UA) has been improving its performance continuously. The company has managed to come a long way since it became a public company in 2005.

At the end of the third quarter of 2014, the company managed to report its 18th consecutive quarter of an increase over 20% in top line growth.

The company can be seen to be following the same strategy that Nike followed which led it the company becoming such a huge name in the world of sports.

2013, it purchased the app MapMyFitness for roughly $150 million. Recently, it has announced that it will be launching another Fitness Tracking app.

These initiatives on the company’s part reveal that it has understood the changing market trends and conditions and that it plans on increasing its popularity in the long run.

Lately, Under Armour (NYSE:UA) has been improving its performance continuously. It has managed to come a long way since it became a public company in 2005. At the end of the third quarter of 2014, the company had managed to report its 18th consecutive quarter of an increase over 20% and the 4th consecutive quarter of an increase of over 30% in top line growth. It has been increasing its overall profit margins as well as its total sales as a result of which its overall income has been improving as well.

The results can be seen clearly; not too long ago, the company managed to become the second largest athletic wear firm in the United States, leaving behind Adidas. These significant achievements have left everyone wondering about the company's overall growth strategy. Towards the final quarter of 2014, UA started making changes to its managerial structure, moving managers from their original positions to new ones.

Let's take a look at some of the factors behind these changes, what the company's goals are and what the impacts of these goals will be on the investors.

International growth as an opportunity

UA has declared that it wishes to increase its total revenues generated from international markets to 12% by 2016. It has been working on this goal actively and has been increasing its total international sales. The company can be seen to be following the same strategy that Nike (NYSE:NKE) followed which made it such a huge name in the world of sports.

UA is creating its image as an American Football brand and has been signing deals with teams in order to promote itself. Targeting the international market is a huge step for any company. Entering the international market successfully and being able to create a good name in the global market will allow Under Armour to benefit significantly.

The company will be able to boost its overall growth significantly after it successfully taps the international market. However, it must keep in mind that targeting the international market may cause it to lose focus at home as a result of which the company can experience adverse impacts.

UA must make sure that it does not neglect the local market while targeting the international market. If it manages to successfully target the international market without neglecting the local market, the investors can expect a great increase in returns along with an increase in the overall value of the company.

Demand for footwear

The demand for footwear is growing and the worth of the footwear market is expected to reach $87 billion from the existing $78 billion by 2020. However, firms such as Nike, Adidas and Puma etc. have already started working on ensuring that they manage to make the most of this growth in the market. This puts a lot of pressure on Under Armour.

In order for the company to be able to benefit from this growth in the size of the market, it needs to ensure that it grows at a higher rate than its competitors. If UA manages to do this, it will be able to increase its overall market share significantly. An increase in market share will not only help the company financially but will also establish a stronger brand image in the eyes of its consumers. This improvement in brand image will then allow the company to further grow.

UA's decision to shuffle its managers can be seen as a positive step towards the company attaining its goal of strengthening its operations and increasing its market share in order to benefit from this increase in the global demand for footwear.

Innovative methods

Under Armour has understood the importance of attracting customers via a number of different channels. In 2013, it purchased the app MapMyFitness for roughly $150 million. Recently, it has announced that it will be launching another Fitness Tracking app. These initiatives on the company's part reveal that it has understood the changing market trends and conditions and that it plans on increasing its popularity in the long run. These initiatives will allow the company to strengthen its image within the eyes of fitness conscious people and athletes. In the long run, its involvement with technology will ensure that the company remains relevant and up to date with the latest technological developments taking place in the market. That will allow it to reach out to new customers continuously.

In short…

UA has quite a few plans for the future. If these plans work out as expected, the investors will benefit significantly and the returns being made to them by the company will improve. The future, therefore, looks bright for UA's investors.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.