Under Armour, Inc. Is Just Getting Started in China

Stephen Curry is helping drive brand awareness for Under Armour in China. Image source: Under Armour, Inc.

One of the biggest draws for investors who are bullish on Under Armour (UAA 1.29%) (UA 1.42%) is its staggering momentum in taking share in international markets. Last quarter alone, Under Armour's international sales climbed a staggering 56% year over year, handily outpacing the company's 30% overall year-over-year growth.

But despite this impressive performance, international still only comprised around 14% of Under Armour's total $1.05 billion in revenue last quarter. By comparison, of Nike's (NKE -0.50%) total $7.57 billion in NIKE Brand revenue last quarter, just over 51% came from international markets. Suffice it to say, then, Under Armour investors are salivating over the chance to benefit from its obviously long runway for global growth.

And arguably no country is more important right now to Under Armour's international ambitions than China, where Under Armour CEO Kevin Plank pointed out the company earned more revenue in its most recent quarter alone than it did from the country in all of fiscal 2014. During Under Armour's most recent quarterly conference call in April, CFO Chip Molloy elaborated that revenue from China nearly tripled on a year-over-year basis last quarter -- compared to the still-respectable 23% growth Nike achieved in China over the same period -- making it Under Armour's single largest international country in terms of sales. 

As it stands, though, many Chinese consumers are largely unaware of Under Armour's performance apparel roots here in the U.S., as it's focusing instead on establishing itself as an athletic footwear powerhouse despite fierce competition from more established brands there. To be sure, much of Under Armour's recent success in China can be traced back to its decision last year to bring NBA MVP (and Under Armour-sponsored athlete) Stephen Curry to the country. Given Curry's record-shattering NBA season this year, the resulting popularity of Under Armour's high-end Curry Two basketball shoe -- which, incidentally, stood alone as the company's No. 1 best-selling item online last quarter -- has helped footwear comprise almost one third of Under Armour's total sales in China, compared to less than 20% for the rest of the world. Nike, for its part, generated more 73% of its revenue in China from footwear last quarter.

It should come as no surprise, then, that Under Armour management recently confirmed it's all set to travel once again to China and Southeast Asia with Stephen Curry later this year to continue driving brand awareness and consumer engagement.

In addition -- and keeping in mind Under Armour had less than 100 stores in China as of its annual investor meeting last September -- the company plans to open an additional 120 owned and partner brand stores in Greater China by the end of 2016. By comparison, Plank reminded investors last year that Under Armour's "two main competitors" -- a not-so-substle reference to Nike and Adidas (ADDYY 0.37%) -- already boast 8,000 to 9,000 stores of distribution in China.

But that's also not to say Under Armour needs to match competitors on a store-for-store basis. Thanks in part to the increasing role Under Armour's digital platforms play in driving growth in today's fast-changing market, Plank suggested a more reasonable long-term goal for Under Armour in China would be to expand to somewhere in the 1,000- to 1,500-store range -- the lower end of which would still represent nearly quintuple the number of stores Under Armour expects to have in China by the end of this year. "Without question," Plank added, referring to China, "we need a physical manifestation of the brand."

Of course, it will take a number of years for Under Armour to reach that goal of building out its physical presence in the world's most populous nation. But if one thing is clear despite its incredible growth so far, it's that Under Armour is just getting started in China.