Under Armour Business review
Introduction Since its intro into the sports apparel market, the maker of performance athletic underwear and clothing has risen to the top of the industry by controlling a big portion of the compression garment market (Biased). It is gaining a foothold in footwear, too. Under Armor is the official footwear supplier of the NFG and ML and they partner with the NAB (Biased). Specializing in sport-specific performance gear. Products are made from moisture wicking and heat-dispersing fabrics that are able to keep athletes dry during workouts (Biased).
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Under Armor sells its products inline, by catalog, and in more than 25,000 retail stores worldwide (Biased). Founding Under Armor was started by a college football player that was tired of sweating through all of his practice t-shirts that lead to many changes of clothes. Kevin Plank was a defensive and special teams player for the University of Maryland that noticed his compression shorts were not sweating through like his cotton t-shirts. (Biased). He then decided to make a prototype of a shirt of material like his shorts in his grandma’s basement (Biased).
He made many more and gave them to his teammates that went on to the NFG (Biased). Ownership Now Chairman and CEO, Kevin Plank added the president’s title to his Job description following the former presidents departure in mid-2010 (Biased). He officially founded Under Armor in 1996, and is the company’s largest shareholder (Biased). He controls about 73% of the voting shares (Biased On Novo. 18, 2005, the day Plank took the company public, the Under Armor PIP was the most successful American offering in five years, and the first to more than double on its opening day (Dilemma).
Stock prices Jumped from $13 a share to Just over $26 (Dilemma). Although analysts predicted Under Armor would fizzle and die, the tock price is now hovering at around $77, the strongest it’s ever been (Dilemma). Competition Under Armor’s main competition are MIKE, Columbia Sportswear, and ideas. MIKE is the leading sports performance seller and to date they have recorded revenue as $25. 31 billion. Columbia Sportswear recorded their revenue at $1. 67 billion and ideas has revenue at $19. 67. Size and Make-up of the Sales Force As of 2012, Under Armor has recorded a $1. 3 billion dollar revenue performance and that number is double of what they had reported in 2005 (Biased). Their one- year sales growth that was recorded from 2011-2012 is a 24. % increase (Biased). Under Armor’s 1 year net income was recorded in 2012 as 128. 78 million dollars and their I-year net income growth was a whopping 32. 9% increase (Biased)! Expanding Markets Under Armor has a growing global market. But its main market is the United States because of its 94% market share there (Biased).
Western Europe holds about 2% and Japan has a small, unspecified amount because Dome Corporation is under contract with Under Armor to sell its brand in Japan (Biased). Under Armor’s profit rose 163% in the second quarter, boosted by stronger footwear ales and continued growth in apparel (Sharron). This prompted them to raise its full-year outlook and sent shares of the company up in morning trading (Sharron). For the second quarter, Under Armor reported a profit of $17. 6 million, or 16 cents per share (Sharron). This is up from $6. 7 million, or 6 cents per share, in the year-ago quarter (Sharron).
Revenue for the period increased 23 percent to $455 million, up from $369. 5 million in the same period last year (Sharron). The major part of the company’s growth strategy continues to be growing footwear and international sales Sharron). Distribution Great product requires great distribution, and they continue to work with their partners like Dick’s Sporting Goods, The Sports Authority, and Academy to elevate their brand (Plank). Ongoing investments such as their All-American and Blue Chip shop-in-shops with Dick’s Sporting Goods are providing a more comprehensive assortment to their consumers.
At the same time, Under Armor continues to look for new ways to reach consumers, especially in channels that are more relevant to certain product categories like Women’s and Youth (Plank). They entered more than 00 new department store doors in 2012, including Macy’s, Dullards, Bell and Lord & Taylor, and are positioned to broaden more (Plank). Under Armor distribution would not be complete without Direct-to Consumer channel. Direct-to-consumer net revenues grew 34 percent in 2012 to over a half of a billion dollars, or nearly the size of the entire business in 2007 (Plank).
The channel represented 29 percent of total net revenues for the year, up from 27 percent in 2011 and 23 percent in 2010 (Plank). The bulk of this business is driven by Factory house outlet stores, which continue to alp them better manage excess inventory while reaching out and providing value to their consumers (Plank). They also expanded stores base in the U. S. From 80 stores in 2011 to 101 in 2012(Plank). Expansion Under Armor also plans to open ten new international offices within the next eighteen months and by the end of next year, the company’s foreign offices will outnumber those in the U.
S (Sharron). The new offices in Australia and Germany are expected for next year, and CIA also plans to open a Mexico City store later in 2013 and will debut its product in Brazil in 2014, Just before the World Cup and two years before the Summer Olympics (Sharron). For the entire year, Under Armor now is expecting revenue to average from $2. 23 billion to $2. 25 billion (Sharron). Also, last fall, Under Armor began a five-year deal as the uniform sponsor of the English Premier League club Atonement Hotshot (Drier). “Our history from a marketing standpoint has been really focused on the US market.
This is the largest paid media effort we’ve done in Europe,” said Stuart Redounds, Under Armor’s vice president of global marketing (Drier). “We feel that it’s time to tell our story in Europe because we’ve built authenticity with our presence on he field (Drier). ” Right now, Under Armor has full uniform sponsorship deals with the Welsh Rugby individual endorsement deals with Atonement defender Michael Dawson, Queens Park Rangers striker Bobby Somoza and Welsh rugby player Jamie Roberts (Drier). Wholesale Business Under Armor generated 70% of its 2011 sales through its wholesale business (Biased).
Its customers include Cabala’s and the Army and Air Force Exchange, as well as Dick’s Sporting Goods and The Sports Authority, which as a pair has accounted for 26% of Under Armor’s 2011 revenue (Biased). The company’s direct- o-consumer business, accounting for 27% of sales, is continuing to grow (Biased). In 2011 it recorded an increase of about 62% compared to 2010 with the help of about 25 stores added during the year (Biased). Under Armor licensing brings in 3% of total revenue (Biased). Market Share Under Armor claims 75 per cent market share in performance apparel, more than any other company (Dilemma).
This is even more impressive when you consider that Mike spends $1. 5 billion on marketing compared to Aqua’s $70 million (Dilemma). Perhaps it’s because Under Armor avoided the way Mike advertised, with big-name athletic endorsements, Under Armor banked on more cost-effective and inventive advertising (Dilemma). “We’ve never embraced the ‘Michael Jordan’ model, with the athlete as icon,” says spokesperson Rick Inguinal, and despite having a rotating roster of sponsored athletes that include McCabe, Columbus Blue Jackets winger Rick Nash, and Baltimore Ravens linebacker Ray Lewis, “we’ve never identified an athlete in our ads (Dilemma). Instead of offering a star millions of dollars to switch over, Under Armor only approaches athletes who already use and believe in their gear (Dilemma). We’re not going to pay someone to wear our product,” says Steve Battista, Under Armor’s UP of brand (Dilemma). With 25 percent net revenues growth, 31 percent earnings per share growth, and significant improvement to inventory positioning, which drove a nearly doubling of their cash position to $342 million (Plank). It has helped deliver eleven consecutive quarters of 20 percent + net revenue growth for Under Armor (Plank).
It has enabled them to add nearly $1 billion in net revenues over the past three years, putting the Company in position to reach their goal established in a previous meeting, two times here net revenues from 2010 to 2013 (Plank). Innovation Innovation has helped successfully transition Under Armor from a “tight t-shirt company” to a fully integrated athletic brand capable of servicing the full needs of athletes (Plank). As proof of this progression, compression apparel represented 63 percent of their apparel mix during the PIP year of 2005 (Plank). Today, it is down to just 14 percent.
Innovation can drive the products, including Charged Cotton and AU Storm, which both posted substantial growth in 2012 following their 2011 introductions (Plank). It can also produce technologies like callback, a fabrication hat reflects the sun’s heat and light, keeping you cooler and more comfortable on as hot summer day (Plank). Better than ever before in 2012, adding a softer touch and anti-odor attributes (Plank). It was the notion of “newness” that Under Armor customers demands and will be a heightened focus as they flow more product to the market while reducing reliance on future programs (Plank).
It is broadening its appeal to more consumers while also reducing dependency on weather extremes by focusing on areas like Fleece, which grew nearly 50% in 2012 (Plank). And it understands that the needs of he athletes are changing, and that versatility is a winning proposition (Plank). Another specific area where innovation is driving results is in Women’s, where key investments made over the past few years in areas such as fit and design are helping introduce Under Armor to a whole new consumer (Plank). Under Armor debuted platforms like Armor Bra and CIA Studio, which are redefining women’s expectations for the brand.
These product messages were amplified by the first targeted Women’s campaign, “What’s Beautiful”, which provided a unique position to challenge and shatter expectations on what the women can accomplish (Plank). Under Armor Women resulted in a nearly $400 million business to date, and they planned to increase the campaign even more 2013 (Plank). To help with the campaign and new women innovation, a new executive Creative Director for Women’s was hired, and they are focusing on assortment, fit, color, and the right distribution for the future (Plank).
Youth products grew at a faster rate than both Men’s and Women’s in 2012 and is planned to again lead the way in 2013 as they focused on product expansions in areas like graphic t-shirts and fill distribution gaps in locations like department stores (Plank). The notion of “NeXT” is the guidelines in the Youth business. Under Armor focuses on youth because they are the consumers of tomorrow, and it determines on how they are communicating with these future athletes (Plank).
They have improved and are focusing on the “NeXT” generation of professional athletes, which includes 2012 National League MAP and World Series Champion Buster Poses, 2012 National League Rookie of the Year Bryce Harper, up-and-coming tennis phenol Sloane Stephens, WEB super welterweight champion Cancel Olivarez and former world #1 amateur golfer, 19-year-old Jordan Spites (Plank). Part of the promise, the ability to be next with the upcoming generation of athletes, it is driven by efforts in their footwear.
Still Just in their seventh year, the category grew 32 percent to reach nearly a quarter of a billion dollars (Plank). However, to date, success has really only shown into growing market share in one category: cleats (Plank). Under Armor is building on-field credibility with athletes through game- changing products such as their brand new CIA highlight football cleat. This type of top product helped Under Armor approach nearly 30 percent market share in both assessable and football in 2012, and they plan to continue to build upon that momentum throughout this year (Plank). Mom of the early success of their CIA Charge RCA product and Micro G cushioning technology to unveil AU Spine last July (Plank). CIA Spine is the unique stance on combining lightweight and stability, and the platform is said to move well beyond running in 2013 (Plank). Marketing Plan Under Armor had a recent revealing ceremony of some of their new products and new places to open last February. On the harbor in Baltimore, the company opened what it calls its “Brand House,” an 8,000-square foot showcase for its latest and iratest sportswear and shoes.
The store features 74 life-sized, fully outfitted mannequins that “will tell the athlete how to dress,” says President Kevin Plank (Burke). Another new apparel item that opened up a new market to avid hunters is the Infrared, part of Under Armor’s innovative Colder line (Burke). The new outerwear features the same ceramic powder used on stealth bombers to shield and disseminate heat and thus remain, well, stealth. Its new technology allows it to re- circulate heat around your body (Burke). Under Armor also launched a new device for athletes and others to train.
They introduced Armor, a digital training monitor, which was available in March (Burke). A chest strap, implanted with a tiny computer, monitors your workout, sending the information, via the cloud, to either your mobile device or an Under Armor watch (Burke). The data collected includes your heart rate and duration of workout. But, the biggest and newest thing it will do is track your willpower, that is, how hard you really worked out, using a combination of your heart rate, intensity and the workout’s length (Burke). “Someday, we’ll have this in a shirt,” says Under Armor’s Senior Creative Designer (Burke).
ARIN Foster, the Houston Texans running back, and Gina Corona, the former MA bombshell-turned-Hollywood actress, came out to talk about the company and Armor (Burke). The ceremony ended by showing the company’s new ad campaign, entitled “l Will. ” It is in some ways an echoing answer to the company’s first big marketing hit, “Will You Protect This House? (Burke). Stock Performance Stock performance shows that Under Armor is “one of the best-run, most innovative companies in the entire apparel space, heck, one of the most innovative companies out there, period,” said Mad Money host Jim Cramer (Broodier).
The following states again how well Under Armor is doing as the second-quarter net income doubled as consumers bought more of its athletic clothing and it expanded its shoe offerings as stated before. Results beat expectations with Under Armor reporting SQ PEPS of $0. 16, $0. 02 better than the analyst estimate of $0. 14 (Broodier). Revenue for the quarter came in at $455 million versus the consensus estimate of $448. 91 million (Broodier). $2. 25 billion, representing growth of 22 percent to 23 percent over 2012 (Broodier).
However, making money in the market involves strategic timing. And with shares trading at 52-week highs the issue becomes whether the time to buy is now (Broodier). “Under Armor stock has rallied 65 percent for 2013, and it’s up 365 percent over the last five years, to the point where Under Armor now sells for 43 times next year’s earnings with a 20. 5 percent long-term growth rate (Broodier). You could make the argument that the stock is too expensive at these levels,” said Cramer (Broodier).
Instead his comments suggest that because the stock has momentum and growth, it commands a higher valuation (Broodier). During Jim Cramer Mad Moneys interview tit Kevin Plank, founder of Under Armor, one can learn that the company should still have huge growth ahead (Broodier). “Under Armor is a $10 billion brand doing $2 billion today,” Plank said By the end of the interview Cramer commented that, “The market cap is too small for the idea. I think the move could actually still be in its infancy (Broodier). ” Conclusions Strengths Under Armor global expansion is on the rise.
This needed strength is clearly shown when trying to compete with sports apparel leaders MIKE and ideas. The expansion of 10 more international offices has given Under Armor more offices international Han domestic. Under Armor’s new brand campaign in South America, Brazil, is perfect. It is right before the World Cup that will be strategically held in Brazil and before the summer ’14 Olympics. Their five-year deal with a European soccer and rugby league and some of Rupee’s most famous athletes helps boost their European popularity as well.
With only 6 percent of sales being foreign, this is a market they can only expand. The major part of the company’s growth strategy continues to be growing footwear and international sales. Direct-to-consumer sales are the biggest reason of the rising profit and expanding Roth as well. Direct-to-consumer net revenues grew 34 percent in 2012 to over a half of a billion dollars, or nearly the size of the entire business in 2007 (Plank). The channel represented 29 percent of total net revenues for the year, up from 27 percent in 2011 and 23 percent in 2010 (Plank).
The bulk of this business is driven by Factory house outlet stores, which continue to help them better manage excess inventory while reaching out and providing value to their consumers (Plank). They also expanded stores base in the U. S. From 80 stores in 2011 to 101 in 2012(Plank). Athletes (Plank). As proof, compression apparel represented 63 percent of their apparel mix during the PIP year of 2005 (Plank). Today, it is down to Just 14 percent. Both posted substantial growth in 2012 following their 2011 introductions (Plank).
It can also produce technologies like callback that keeps you comfortable on as hot summer day (Plank). Reason’s on why you should consider buying Under Armor stock is because of shares trading at 52-week highs and that its most recent quarter marks 13 consecutive quarters of 20% year-over-year net apparel sales growth, but also 1 1 instinctive quarters of achieving at least 20% overall net revenue growth. Under Armor currently reigns in the performance apparel market it created, and the segment was still responsible for 76% of its $1. 83 billion in 2012 sales.
With Under Armor aggressively expanding its presence in the athletic footwear market, where the company saw its revenue increase 43% year to year in 2012 to $45 million. It is viewed that Under Armor still has more than enough room to grow. According to recent research, the athletic footwear market is expected to reach nearly $85 billion globally by 2018 from $74 billion in 2011. Weaknesses Under Armor’s biggest weakness is it’s competition. MIKE and ideas especially have most of the control of the market as you can clearly see above demonstrated in the graphs.
This hinders Under Armor most in the global competition. It does not show enough competitive advantage compared to MIKE and ideas. The prices are about the same and the products are sooner or later in all of the competitor’s stores. Under Armor is still providing great innovation, but it is taking some very small steps in closing the gap. It leads only in the most recent 12-month annual growth by almost 0 percent compared to Mike, ideas, and Columbia Sportswear. , but it s still billions away to even ideas at $19 billion in total revenue as MIKE is $26 billion.
With Under Armor having a low international presence as stated above, it is obviously hindering their growth. Under Armor still has a huge opportunity to grow and it has not experienced the growth that they need to catch up with its’ competitors. With that said, it is not popular in the European and Asian markets. Their recent deal with European Rugby and Soccer leagues should allow them to grow, but you never know if this will work. This is a huge, already established sports apparel market, especially in the European Soccer, as soccer is like football in America.
If that market can be reached, they will have tremendous growth, as it is expected through some previous research. Another item to think about is the stock performance. Right now stocks are a very good investment as the 52-week high tells us. Sooner or later this will not be the case. When will the stocks fall? This is something that will happen the timing is unpredictable and can determine a tremendous amount. Under Armor went into the footwear market and is up against the sports reference footwear leader, MIKE. This is a hard market to Join with a leader that has been established for over 40 years.
They have a long road ahead of them to Recommendation To strengthen the markets that Under Armor is trying to reach to be more globalizes, they should specifically design more towards those markets. Each country has their own style and way of wearing certain clothing like long short, short shorts, or tight shirts instead of baggy shirts. In order to sell an item, it needs to be catered to the target market. So possibly they need to cater to those markets more in order to eve a larger than 6 percent international sales. Under Armor also has a lower marketing campaign than their competitors.
If they expand this budget, since they have done well in profit over the last quarter, they can use that money to do an even larger marketing campaign. Personally, I have not seen a lot on them on television or on computer ads. I see Apple and Honda all the time on commercials. They need to make them even more memorable. They need to become an even bigger rival. Under Armor is closing the gap ever so slightly between its competitors MIKE and ideas. That is the key, to keep going, to keep closing. They Just need to keep focusing on that goal.
From recent reports, Under Armor is slotted to do very well for a very long time. Growing their popularity would mean to Just be memorable. Design products that are better than MIKE. Give out an opinion poll or they need to listen more closely to the consumers. Get what the consumer wants. Do they want new more innovative shoes? Or do they want more specified piece of clothing for their sport? Know what the consumer wants and go after it. By doing this, they can gain a competitive advantage. Quality, is not going to be a popular choice because it is already a part of the market.
Under Armor may need to come up with an advantage that sets them apart from everyone else. An idea might be to have a pant that can be custom fitted to the athlete’s body, or a shoe that you can custom make. MIKE has this and it is successful, but if Under Armor did this cheaper or free shipping or had a way for teams to do it, then it could set them apart. Under Armor already outsource their production almost completely oversees. They price their items high because they believe that the brand will sell at that price, and lot of the time it will.
But for it to possibly be an advantage in the market, they should consider lowering their prices. This will sell more and allow them to gain the obvious, more revenue. Under Armor is doing well with their footwear, but they need to keep innovating it even more. Sometimes unique is not always popular. They need to keep innovating style and technology that they are known for in their footwear. This will keep them on the hunt with their competitors. Advantage and to keep gaining on their competitors and they will be on top very soon.