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Under Armour's 5 Biggest Growth Opportunities

By Brian Withers – Aug 22, 2017 at 1:16AM

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Under Armour doesn’t need new markets or categories to rebuild its growth trajectory.

Apparel and footwear company Under Armour (UA 0.12%) (UAA 0.11%) has depended heavily on the growth engine that got the company its start: athletic apparel for men sold through wholesale partners in the U.S. With it's 26-quarter streak of 20%-plus revenue growth at an end, the company is looking for other avenues for growth. But the company doesn't have to innovate or get into businesses it's not already in. Opportunities in international, athleisure, footwear, e-commerce, and women's wear provide plenty of opportunity for the company to get it's mojo back.

Read on for details on each of these important growth areas.

Five star Under Armour athletes -- Kelley O'Hara, Tom Brady, Stephen Curry, Bryce Harper, and Natasha Hastings -- all in action poses and wearing Under Armour Threadborne clothing.

Under Armour athletes (left to right): Kelley O'Hara, Tom Brady, Stephen Curry, Bryce Harper, and Natasha Hastings. Image Source: Under Armour


When Under Armour went public in 2005, only 2% of its revenue came from outside of North America. The international business has come a long way in the last 12 years and in the most recent quarter, the international segment grew 57% to be 22% of total revenue. But, as a global athletic apparel and footwear brand, it's still got a long way to go. As a comparison, Nike's core business (not including Converse) has 53% of its revenue from international sources. 

Under Armour is investing heavily in its international business and its overseas footprint. In the past year, it grew its Brand House and Factory House stores by 71% internationally, but at only 89 of these stores outside North America (and 179 in North America), there's still plenty of room for growth.


Athleisure, or "sports lifestyle," as Plank describes the Under Armour-branded clothing you'd wear outside of the gym, is another opportunity. Plank said in the first-quarter 2017 earnings call that "sport lifestyle still remains ... our largest opportunity, and frankly, by a mile." He goes on to estimate that a third of the company's two biggest competitors' revenue comes from this clothing category. Morgan Stanley estimates activewear could be a $350 billion market globally by 2020.

Under Armour doesn't break out its sales in this category, but the company is certainly focused on the potential. Plank said the company is "attacking" the opportunity and "our shift to lifestyle isn't about a new line or one collection or one drop. It's about truly evolving the entire company toward the space."


It's somewhat surprising that Under Armour didn't get into footwear until 2006, a full 10 years after Plank started selling compression T-shirts out of the back of his car. Footwear grew to be a $1 billion business for the company in 2016. While this segment grew a robust 49% in 2016, in the most recent quarter, footwear sales actually declined 2%.

This category continues to be dominated by Nike, which started as a footwear company, and Adidas. Nike's fiscal year 2017 revenues for footwear were 21 times Under Armour's 2016 number at $21.1 billion, growing at a currency-neutral 8% year-over-year and the Converse brand adds another $1.95 billion in revenue. Adidas is growing even faster at 26% currency-neutral revenue growth to a 2016 full-year of $10.1 billion. 

Throw a resurging Skechers into the mix and there's certainly a lot of customers all over the world buying footwear, and Plank knows this. In fact, posted on his office wall in red is written, "Don't forget to sell shirts and shoes."


Saying e-commerce is big opportunity is an understatement. Statista has numbers estimating online e-commerce could be a $485 billion market in the U.S. by 2021. Plank has gone on record as saying, "I don't know if anyone can invest heavily enough in digital right now." The company has done just that. It's invested in its 30 e-commerce sites around the globe with localized experiences and its three fitness apps that collect data from its 200 million users.

It's unclear what portion of the company's revenue is attributed to its e-commerce efforts as this important selling channel is buried in the company's direct-to-consumer business segment. This segment grew 20% last quarter to become 35% of the company's total revenue. Since this segment is a mixture of brick-and-mortar stores and e-commerce, it's an almost certainty that the company's e-commerce business is growing well. While it's possible for online sales to cannibalize brick-and-mortar sales, if Under Armour makes it easy for customers to buy online, e-commerce could be a net growth driver for the company.

Women's wear

Last, but certainly not least, the women's business is another $1 billion segment for Under Armour. When Plank was asked about the growth opportunity for women's products in the third-quarter 2016 earnings call, he said the category remained one of the company's "brightest opportunities" and it wasn't going to stop at $1 billion.

The company had women in mind when it inked its partnership with Kohl's, whose customers are predominantly women. These 1,200 stores across the U.S. give the company additional exposure to this important customer segment.

Plank and the management team at Under Armour know that they don't need to get into new markets or product categories to grow. At the company's most recent annual meeting, Plank indicated that the company needs to go from "acquisition to activation," meaning that the company has all of the assets in place to grow -- it just needs to execute.

Brian Withers owns shares of Nike, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of and recommends Nike, Skechers, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool has a disclosure policy.

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