Are Investors Aware of Under Armour’s Under-Appreciated Growth Story?

Under Armour may never be "the next Nike" but the company is certainly well positioned for both domestic and international growth over the coming years.

Jun 13, 2014 at 8:00AM

Under Armour (NYSE:UA) presents investors with a compelling international growth story. The company is strategically and aggressively positioning itself to become a broadly appealing, multi-category brand that caters to men and women.

A look to the future?
Under Armour recently opened a massive 20,000 square foot "Brand House" concept in Soho, New York City. The company hinted during its first-quarter conference call on April 24 that it can operate all of its stores, including its Brand Houses, at a profit.

Under Armour stands out as many wholesalers' full-price and flagship stores (especially in New York City) aren't necessarily profit drivers, they're more for marketing exposure.

Kevin Plank, Under Armour's Chief Executive Officer, said in reference to Brand House:

Every activity that we involve ourselves in has a line of sight profitability in winning. We don't do anything that we see as being just for the brand, just for marketing, everything must have a return. And that commitment is something that I think is cultural and I think it plays to what the Under Armour brand is.

U.S. specialty retail stores have historically had a rough time duplicating their domestic success in the international market. As Under Armour plans to become a global athletic brand, owning and operating large retail spaces globally is a key component of its growth. Management disclosed that it saw 79% growth in international net revenue in the first quarter. As such, the company continues to allocate more dollars toward international.

It would not surprise many if the company were to open similar Brand House locations both domestically and internationally if the Soho model proves to be a winner in Soho. The company can look at markets where it has recently expanded, such as Brazil, in addition to already established markets across Europe and Australia.

A focus on women's apparel sales
Perhaps a surprise to some is the fact that Under Armour allocated approximately equal amounts of floor space to men's and women's apparel. As such, Under Armour recognizes the growing importance of the women's apparel market.

During Under Armour's first-quarter conference call, Kevin Plank noted that the company is not in "launch mode" when it comes to women's apparel sales. Rather, Plank said that the company is in a "perfecting" mode as it improves its dedicated product lines such as the Studio line of apparel and Armour Bra.

Sales to women represent just shy of 25% of the company's total sales. This represents a coveted and sizable addressable market, evidenced by the number of competitors that are either rushing to enter the space, or improving their assortments.



In fact, one of the lone highlights in the first-quarter results of Dick's Sporting Goods (NYSE:DKS) was women's apparel, with comps in the low-teens range.

However, Under Armour is ahead of the game in comparison with Dick's Sporting Goods, which admitted during its first quarter conference call that it is still in the process of allocating more of its square footage to women's apparel.

The Under Armour advantage
Dick's Sporting Goods has to undergo expensive, distracting, and time-consuming processes to improve its store layouts. Additionally, Dick's Sporting Goods is in the process of bringing in new technologies such as tablets to enhance the customer experience.

This demonstrates Under Armour's advantage over other retailers that are forced to implement radical technological and product assortment changes. By starting now, Under Armour is able to incorporate these changes with greater ease than its peers. Under Armour opened its SOHO store with mobile POS systems already equipped.

In fact, Under Armour could find it advantageous over time to pursue selling its products through its own corporate-owned full-price stores instead of relying on sales at apparel and sporting goods stores, like Dick's Sporting Goods.

By opening its own stores over the years, the company could see a higher EBIT figure than it would achieve through an equivalent amount of unit sales through a third party. Additionally, the company would be in full and complete control of the product assortment and its brand message.

For now, Under Armour chooses the department store route as it is likely to be less capital intensive. At least the company holds the option of going at it by itself. Regardless, Under Armour's growing popularity should translate into higher sales regardless of its future direction.

Bottom line
According to NPD data, the 9% sales growth of athletic apparel in 2013 noticeably outperformed the 2% sales growth of the overall apparel market in the same year. This trend is showing no signs of slowing down, and this makes Under Armour one of the best-positioned companies to capitalize on the industry's growth given its edge in innovation and technology and early stage growth engines.

Under Armour is a relatively small company with $3 billion in annual sales (compared to Nike's roughly $28 billion) but can deliver impressive growth for years to come as the company continues to gain traction in women's apparel and international growth.

Once Dick's Sporting Goods invests in improving the customer experience with the appropriate technology and store layout, the company should offer impressive growth. The company is an industry leader that can also benefit from the positive industry trends. As such, investors should consider buying strong companies when things look bleakest.

The next innovation in apparel will be huge
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Jayson Derrick has no position in any stocks mentioned. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers