Maybe you're not happy with your running shoes. Maybe you're thinking, "Gosh, normal shoes just aren't cutting it for me -- I wish someone would destroy the rules of footwear construction." Good news... that's what Under Armour (NYSE:UAA) has claimed to have done with its Speedform Apollo line of shoes. (Also good news: You might have a future in marketing, because who would ever think or say that phrase?)
The Speedform Apollo shoe is, almost literally, a bra for your foot: Under Armour's big breakthrough is in making the new shoe uppers in a bra factory, using that technology to create an almost seamless upper. It's just one more apple in the Under Armour cart on the way to the juice factory.
Footwear in America
Sales of lightweight running shoes -- a category that the 6.5-ounce SpeedForm Apollo falls into -- have been sharply on the rise. Through the end of October of last year, the category had a 22% increase in sales over the same period in 2013. That's a growing market that Under Armour would love to be a part of.
Last year, the company's footwear division accounted for just 13% of the company's revenue. By contrast, Nike earned 57% of its revenue from footwear sales. Under Armour sees that opportunity, and has said that footwear growth is going to accelerate throughout the year.
While Under Armour isn't going to be competing with Nike's $14.5 billion in annual footwear revenue anytime soon, it can compete on a smaller, individual level. Last year, Under Armour nailed the No. 1 spot for football cleats with Eastbay, a major athletic footwear distributor. The brand's Highlight cleat held the top spot in football for months, doing well in baseball, as well.
Under Armour's growth in 2014
This year is going to be big for Under Armour, if all goes according to plan. The business is pushing on both its footwear and women's lines, taking advantage of its momentum in both. In 2013, Under Armour was able to gain some ground against flagging Lululemon, giving it an extra boost with disgruntled shoppers. The success of its Highlight cleat gave it the speed it needed to start taking on the footwear business this year.
The one thing for investors to keep a sharp eye on is how the increase in footwear affects Under Armour's margins. Supply chain efficiencies are supposed to roll in this year, which should help keep the income sheet healthy, but footwear is a lower-margin business. Right now, management is expecting "minimal impact to consolidated gross margins as the expected sales mix impact is now planned to be offset by improved footwear product margin." That can always change, though, and the brand is already going to be sinking cash into expanding internationally.
However, if the forecast is accurate, this could be a big year for Under Armour. International growth, footwear expansion, and the continuing trend of market share gains in women's wear all point to good news for Under Armour.