Two joggers sprinting.

Image source: Under Armour.

The sports-apparel industry hasn't produced strong returns for investors recently. Nike (NKE 0.45%) was the Dow's single worst-performing stock in 2016, and Under Armour (UA -0.15%) (UAA 1.04%) fell even harder with a 28% yearly decline.

Nike has had a better start to 2017 after the company beat expectations for its fiscal second quarter. Under Armour steps up the plate this week, with quarterly results due out before the market opens on Tuesday, Jan. 31. Here are a few key trends for investors to watch in the report.

Sales growth

Under Armour's five-year sales expansion streak makes it one of the fastest-growing stocks on the S&P 500. Revenue has doubled over just the last three fiscal years, and the company has managed 26 straight quarters of 20% or better year-over-year gains.

UA Revenue (Quarterly YoY Growth) Chart

UA Revenue (Quarterly YoY Growth) data by YCharts.

The growth pace is slowing down, though, falling from 31% to begin 2016, to 28% and then 22%. The unexpected recent decline was driven by the bankruptcy and liquidation of Sports Authority, a key retailing partner, and it caused CEO Kevin Plank and his executive team to push their full-year growth guidance down slightly -- to 24% from their initial 25% reading.

Nike's expansion pace is slowing as well, but investors have higher growth hopes for Under Armour, which makes the stock sensitive to even small shifts in the revenue pace. Overall, look for the company to close the year at just below $5 billion in annual revenue -- up from $2.3 billion in 2013.

International expansion

The company is focused on growing into a global brand, with revenue from outside the U.S. accounting for 15% of the business, compared to less than 10% two years ago. That success still leaves plenty of room for improvement, given that Nike counts close to 50% of its sales as coming from the international segment. In absolute terms, Under Armour's international segment was worth $100 million a few years ago and is now on track to pass $500 million.

Chart showing Under Armour's international sales from 2012 to 2015

Data source: Under Armour financial filings. Chart by author.

China is the single geography that management is most excited about, and faster-than-expected gains there are a key reason why executives think they can still hit their 2018 sales-growth target of $7.5 billion despite the recent slowdown in the U.S. Plank and his team should have plenty to say about China and about the international segment overall in this week's report.


Building a selling infrastructure from scratch while delivering advertising support in new markets is expensive, but it's just one of the factors driving Under Armour's profitability lower these days. Investors can lump spiking footwear sales and rising competitive challenges to that mix of threats to their returns.

The company should post a 47% gross profit margin in 2016, down from 48% in 2015 and 49% in each of the prior two fiscal years. Nike is suffering from many of the same pressures and has also seen its margins worsen. Under Armour's slump has been a bit more jarring to investors, though, given that the company's profitability mark is at its lowest point in over a decade.

UA Gross Profit Margin (TTM) Chart

UA Gross Profit Margin (TTM) data by YCharts.

At the last quarterly check-in, Plank told investors that management is opting to invest in growth over producing higher short-term profits. The company still expects to pass $7.5 billion of revenue next year, but believes it will do so at a lower profit margin and thus won't be able to hit its goal of $800 million of operating income that year. Executives on Tuesday should discuss how the latest global demand trends they're seeing will affect those goals as they issue their official 2017 outlook, which is likely to call for growth in the low 20% range.