Under Armour Steps Up Its Efforts To Bring New Customers To The Brand

February 24th, 2015 by Trefis Team
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Under Armour (NYSE:UA), a developer and distributor of athletic apparel, footwear, and accessories, enjoyed an excellent 2014. Full-year 2014 sales climbed an impressive 32% to cross the $3 billion mark for the first time. The revenue growth was driven by a 30% increase in its core apparel business to $2.3 billion, a 44% jump in footwear to $431 million, and a 27% growth in accessories to $275 million. The higher margin direct to consumer business saw sales increase 32% for the full-year, and now represents 30% of the overall revenue. 2014 International revenues also grew by a staggering 96% compared to 2013’s figure. [1]

Despite the astonishing 2014 performance, there are two growth opportunities Under Armour has only scratched the surface of. Below, we take a look at both those opportunities and analyze what they represent for the company’s future prospects.

Biggest Ever Brand House

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In the earnings call that followed the announcement of the fourth quarter’s results, Under Armour CEO Kevin Plank announced that the company will be launching its largest brand house yet in Chicago. He said that the brand house will highlight the specialization, innovation, and localization of the company’s products. It is a strange thing to highlight one brand house when so many others are also being made. Even though the store is going to be especially large, the decision to talk it up is not just limited to the store itself. The company has talked about how its direct to consumer business represents a big opportunity to bring a new customer to the brand. The U.S. based sportswear company is using the brand house as an opportunity to tell a broader story about the brand to potential new customers. This is something it cannot do when it is selling its products in a third party department store.

This is not the first time the company is trying out this concept. Under Armour’s management has always been upfront about its ambition to turn the brand from purely American to a global one. That ambition received a significant boost late in 2013 with the opening of an Under Armour Experience store in Shanghai’s brand new mall, the Jing An Kerry Centre. This is a highly unusual venture with a unique retail concept: The Experience store features an immersive wrap-around video experience that tells Under Armour’s story. Another store, carrying a collection of Under Armour product, is connected. The idea is clear: introduce new customers to Under Armour’s story and then get them to buy some gear. [2]

Connected Fitness Initiatives

Kevin Plank also hinted that the company will soon integrate its fitness initiatives into its store concepts. In the earnings call, the company disclosed that it spent $85 million on Endomondo and will soon close its $475 million deal to purchase MyFitnessPal. Together, the two companies can boast of an amazing 100 million registered users. [3] When the company manages to integrate them into its MapMyFitness platform, it will have the biggest digital health and fitness community in the world on its books.

Plank said that roughly 60% of these users are based in North America and notably 72% of those users are women. [3] The latter should provide a major fillip to the company’s attempts at growing the revenue generated by its women’s business, which received a major boost  following the sponsorship deal with ballet dancer Misty Copeland late last year. [4]  With the addition of Endomondo and MapMyFitness Pal to the MapMyFitness platform, Under Armour will have a wealth of valuable information regarding user needs at its disposal. The company can leverage this information for the development and marketing of products in the future.

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Notes:
  1. Under Armour’s (UA) CEO Kevin Plank on Q4 2014 Results, Seeking Alpha, February 2015 [↩]
  2. Under Armour Experience Store, Biz Journal, August 2013 [↩]
  3. Ref: 1 [↩] [↩]
  4. Why Gisele Bundchen and Misty Copeland didn’t have a big impact on Under Armour’s apparel sales, Biz Journal, October 2014 [↩]