Shares of Under Armour(NYSE:UAA) have seen little movement since the company reported its solid fourth quarter results two weeks ago. But make no mistake: The budding performance apparel and footwear specialist is firing on all cylinders as it enters 2015.
During the earnings call with analysts, Under Armour CEO Kevin Plank offered some great perspective on where the business he founded will go from here. Below are five key points from the discussion.
Balance made crossing the $3 billion mark even more impressive
Crossing the $3 billion revenue mark in 2014 was an important milestone for our brand, and we did so with the most balanced growth in our history. [...] The growth was across all categories and genders across our wholesale and direct businesses, and new categories and established ones, and also across geographies.
Specifically, full-year 2014 sales climbed an impressive 32% year-over-year to $3.08 billion. That was driven by a 30% increase in its core apparel business to $2.29 billion, a 44% jump in footwear to $431 million, and a 27% increase in accessories to $275 million.
Meanwhile, the higher-margin direct-to-consumer business saw sales increase 32% for the year, representing 30% of total revenue. And though international sales were just 9% of the top-line last year, that is a whopping 96% jump from 2013.
Speaking of which ...
International efforts will continue to accelerate in 2015
International revenues grew 96% to $260 million in 2014 as we open new markets around the globe. [...] We will strategically grow with our wholesale partners around the world, continue to build out the international brand house stores, going from 18 stores at the end of 2013 to 68 stores in 2014 and adding more than 100 doors this year.
Just one year ago, Under Armour was telling investors its fourth quarter 2013 international sales rose just 9% to $37 million. Around the same time, however, I wrote that Under Armour was also promising "big pushes" to seize on the international opportunity -- a promise on which it is safe to say the company delivered this year.
Assuming Under Armour can sustain that momentum in its international brand house stores this year, it will be well on its way to following in Nike's footsteps by collecting more than half its annual revenue overseas -- all while continuing to grow its current core North American business at an impressive pace.
Under Armour footwear continues to take market share
Our footwear business helped accelerate our overall growth in 2014, with revenues up 44% for the year to $431 million. As we've been discussing on these calls, we are most proud of the foundation and the team we are building in our footwear category, as we continue to gain share and drive innovation in large categories like running and basketball.
Plank has long made it clear he wants to surpass Nike to become the No. 1 footwear brand in the world -- an incredible goal, by the way, considering Nike brand footwear generated over $3.6 billion in sales last quarter alone. Nonetheless, it is no surprise Under Armour is gaining share as it positions itself with some of the biggest athletes in the world. Tom Brady won the Super Bowl wearing UA cleats, for example, and the ever-unguardable Stephan Curry just appeared in New York City last week to debut his first signature Under Armour shoe.
Plank also noted that the debut would be introduced with the help of a "special guest" in what will ultimately be the largest advertising campaign in company history. Sure enough, the first stage of the campaign began with this commercial a few days ago:
Biggest ever Brand House is on its way
In Q1, we are opening our largest Brand House yet Michigan Avenue in Chicago, where we will highlight the innovation, localization, and specialization of product that we can only do in a 30,000 square foot Brand House environment.
So why highlight a single Brand House when so many others are being built? However large it is, this is not about just one store. You might recall that last September, Plank called the direct-to-consumer business the "best opportunity to bring the UA brand to a new consumer, whether that's a 25 year-old athletic female in our Soho store or a 14 year-old future Premier League player."
In short, Under Armour is using its biggest ever Brand House as an opportunity to demonstrate its broader strategy of telling its story to consumers. And that is something it can do most effectively when it is the one calling the shots, not a third-party department store.
Without providing much detail, Plank also suggested we will soon see its Connected Fitness initiatives integrated into the stores, which leads me to his final point.
Two big reasons Under Armour spent $560 million on connected fitness
The acquisitions we announced earlier today accomplish two very important things. First, the immediate scale we gain by adding Endomondo and MyFitnessPal to the MapMyFitness in UA Record platform, positioning Under Armour as the world's largest digital health and fitness community. And second, how this investment would enable us to better anticipate our consumers' needs, drive more informed purchase decisions, and authentically build brand loyalty by helping our consumers lead a healthy life.
For perspective, Under Armour disclosed some hard numbers in its earnings release, saying it already spent $85 million on Endomondo and will soon close on its $475 million deal to buy MyFitnessPal. The two companies collectively boast a whopping 100 million registered users. Keeping in mind user overlap when combined with MapMyFitness and UA Record platforms, Under Armour will indeed enjoy the largest digital health and fitness community in the world, with 120 million users upon completion of the MyFitnessPal purchase.
In the call, Plank also elaborated that around 57% of those users are in North America. But perhaps most notably, 72 million of those users are women. This provides Under Armour another avenue to continue building its burgeoning women segment, which really started to pick up steam with its sponsorship of Misty Copeland late last year.
And yes, I will admit the second "thing" is more like three in one. But Plank's reasoning still stands: Because of the insight Under Armour was able to gain since acquiring MapMyFitness for $150 million in late 2013, it knows all too well the value of building rapport with and getting to know its consumers. By adding Edomondo and MyFitnessPal to the mix, Under Armour now has a treasure trove of valuable information at its disposal and more direct links to fitness-oriented consumers than any of its peers can claim.