Here’s How Under Armour Can Benefit From Its International Expansion

by Trefis Team
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Under Armour (NYSE: UA) is struggling to grow revenues amid a weak apparel market in the U.S. which led to a significant decline in its top line for Q4 2016. With more than 80% of its revenues coming from North America, the company is heavily dependent on the region for growth. However, Adidas is now increasing its focus on North America and looking to adopt a model where products can be ordered based on demand, instead of bulk manufacturing. This model is similar to fast fashion retailers who have seen significant success and displaced traditional players such as Gap Inc. With competition in the U.S. intensifying and the overall environment not being very conducive for growth, international expansion can help Under Armour grow revenues in the long term.

Under Armour recently debuted in India by launching its brand on Amazon fashion. Through its dedicated Amazon brand store the company will sell more than 330 styles of clothing and footwear in India. Sportswear is a high growth market in India. According to Euromonitor this segment is likely to grow at a CAGR (compounded annual growth rate) of 12% over the next few years and reach around $8 billion by 2020. Nike and Adidas already have a presence in the country with a retail market share of less than 5% each, with Nike being the market leader. However, the Indian retail sportswear market is highly fragmented with a huge presence of unbranded products. With economic growth, increasing disposable income, and rapid urbanization in the region, demand for branded sportswear is increasing. Under Armour has a huge potential in the region as it looks to tap into this demand.

Performance in Under Armour’s international segment has been stellar. In the last three months of 2016, the company’s international sales increased by 55% and now account for 16% of its total sales. As the company faces headwinds in North America, its international segment can be the next wave of growth. Under Armour is on track to more than double its sales in China  and with its debut in India it is likely to tap the growth potential of this emerging market. Competition in these regions remains strong as both Nike and Adidas have an established presence in India and China. However, Under Armour can establish itself strongly in these regions given the fragmented market and high growth potential. We believe as the company struggles to grow in the U.S., emerging markets could provide it with a much needed boost. Global expansion can become its next growth driver.

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