Under Armour Benefits From Growth in Digital & DTC Platforms

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Under Armour, Inc.'s UAA focus on brand development, and expansion of DTC and technology-based fitness businesses bode well. Furthermore, apart from rolling out e-commerce platforms, the company continues to look for opportunities to expand global footprint.

All these efforts have boosted the company's top line, which came ahead of the consensus mark for the third quarter in row and also rose year over year in second-quarter 2018.

Also, these factors raised investors' optimism on this Zacks Rank #2 (Buy) stock with a Growth Score of A. So far this year, shares of Under Armour have gained 30%,  outperforming its industry 's and S&P 500 index's growth of 15.9% and 3.5%, respectively.

Let's Introspect.

Digital Fitness Business: On Track

With increasing consciousness about fitness among people, sports apparel makers are entering the fitness gadgets business and other tracking platforms to attract customers. Notably, the acquisitions of MapMyFitness, Endomondo, and MyFitnessPal are in line with the company's strategy of expanding its reach in the fitness space. Also, the company unveiled its state-of-the-art line of Connected Fitness products comprising UA HealthBox, UA SpeedForm Gemini 2 Record Equipped and two models of wireless headphones. In fact, sales of UA HOVR, which was launched in February 2018, surpassed management's expectations. Furthermore, Under Armour is banking on three platforms - HOVR, Charge and Micro G - to boost growth.

Growth in DTC Platform

Under Armour has been trying to boost its DTC business through store expansion initiatives and enhancement of its e-commerce platform over the past few years. This, in turn, has led to growth in DTC revenues by 7% to $414 million during second-quarter 2018. Notably, DTC's contribution to total revenues reached 35% in 2017 from 6% in 2005. In second-quarter 2018, DTC's contribution to total revenues was 35% of global revenues.

Other Factors at Play

Management had earlier announced 2018 restructuring plan in order to utilize financial resources more efficiently. This will address the evolving demands of the changing consumer environment in a better way. In this regard, the company announced to reduce 3% of its global workforce as part of 2018 restructuring process, which is expected to be concluded by March 2019.

Moreover, through this restructuring plan, the company intends to simplify its organizational structure, attain cost effectiveness and operational efficiencies, and allocate resources in best alternatives. This prompted management to raise the lower end of its 2018 earnings view.

Additionally, Under Armour continues to seek opportunities for increasing its global footprint and market share. The company (which generates major portion of its revenue from the North America region) intends to expand business operations to other parts of the world. Over the years, the company has opened its factory and brand stores in Canada and China as well as given franchise licenses in many countries. Also, Under Armour is expanding its DTC business in the U.K., Germany and the Netherlands.

Under Armour has also entered into deal with popular athletes that will help in enhancing brand recognition and get an edge over its competitors. Its partnership with Kohl's KSS for selling apparel, accessories and footwear at Kohl's outlets is quite encouraging, and is expected to enhance customer reach.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: KSS , GIII , UAA , GES

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