Recently, Under Armour (NYSE: UA) and its flagship school, the University of Maryland, have been generating a lot of press based on their interesting uniform choices. The uniform the football team wore the opening week of the season was the talk of sports television for a few days. Now head coach Randy Edsell tweets midweek to announce what uniform the team will be wearing that weekend. This is not by accident.

Under Armour is simply doing the same thing pioneered by Nike (Nasdaq: NKE) and the University of Oregon athletic program. By placing themselves in the collective consciousness of potential customers, Under Armour is now a topic of conversation, and can also be a great stock for your portfolio.

Stores, shmores
My Foolish colleague John Maxfield gives Under Armour some grief because it doesn't rate on his list of sales per square foot. This is slightly unfair. Under Armour relies on major sports retailers, like Dick's Sporting Goods (Nasdaq: DKS), to sell its products, as well as online sales. These sales, of course, don't affect Under Armour's sales per square foot figure, but Dick's instead. This differs from apparel company lululemon athletica (Nasdaq: LULU), which sells through its own branded stores, and managed to pull in $1,800 of revenue per square foot.  Under Armour only has 76 stores -- four full-price stores and 72 outlet stores -- that sell its products exclusively, compared to Lululemon's 133, but its products are sold in over 24,000 stores worldwide. Its $780 of sales per square foot is clearly a skewed figure, as their products can also be bought elsewhere.

Investors take heed
There are some other metrics that we can examine to see if Under Armour is a great investment for you. In fact, Under Armour compares favorably with many of its competitors:


Gross Margin (TTM)

Profit Margin (TTM)

5-Year Sales Increase

2-Year CAGR

Under Armour















Hanesbrands (NYSE: HBI)





Columbia Sportswear (Nasdaq: COLM)










Sources: Yahoo! Finance and CAGR = compound annual growth rate. N/A = not applicable.

Gross margin indicates a company's pricing power, meaning that people are willing to pay more for the company's brands than its competitors'. Under Armour's gross margin has been trending down this year as it moved the production and sale of bags and hats in-house, losing licensing fees. The loss of these licensing fees was made up by net revenue from accessories increasing 266% over last year, but the costs associated with making its own hats and bags reduced margins overall.

Although sales have been increasing and the company has more than doubled investors' money over the past two years, the profit margin is still decreasing as the company continues to expand its outlet stores from the current 72 to an eventual 120.

Not all rosy
One of the many complaints about Under Armour is that its inventories have been growing over the previous two quarters. I'd counter this argument by saying that inventories are higher because of the move of hats and bags mentioned above. Nevertheless, the company has been struggling to meet retailer demand for products, prompting the addition of two new vice presidents with 46 years of collective sourcing and supply chain experience to improve operations and increase margins.

The company expects its inventory growth rate to be more in line with net revenue growth for the third and fourth quarters of 2011. We can check this assumption when it releases third-quarter earnings in a few weeks -- if it shows another increase in inventories, it may be time to take a closer look.

It bears watching
I've been a fan of Under Armour for some time, and my fandom has yet to wane. I still think Under Armour is a great stock. I will be paying close attention on Oct. 25 when it releases its quarterly earnings and its inventory numbers. I encourage you to do the same by adding them to your free My Watchlist.