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Under Armour’s Apparel Segment Had Better Pricing Opportunities

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Revenue drivers

As mentioned in the last part of this series, Under Armour’s (UA) 4Q14 revenue rose 31.1% year-over-year, or YoY, to $895 million. This made it the 19th consecutive quarter with more than 20% revenue growth. Full-year 2014 revenue rose 32% to $3.08 billion. It was ahead of Wall Street expectations of $3.04 billion.

There was revenue growth in all of the product categories, genders, and age groups. There was revenue growth across all of the geographies. The key product categories were apparel and footwear. They were the most relevant growth drivers.

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Apparel sales

Under Armour’s largest product category is apparel sales. Apparel sales increased 30% to $708 million in 4Q14—compared to $546 million in 4Q13. During the quarter, the company launched new offerings across training, hunting, and studio. It also launched new platform innovations—ColdGear Infrared, Storm, and Charged Cotton—during the fourth quarter.

For 2014, apparel sales came in at $2.3 billion. Apparel sales were 74.3% of the revenue. That’s a 30.2% increase from $1.8 billion in 2013. In 2013, apparel sales were 75.6% of the revenue.

Like Under Armour, other apparel companies—like Lululemon Athletica (LULU), VF Corp. (VFC), and The Gap (GPS)—are also more active on the apparel side. Other companies—NIKE (NIKE) and Adidas (ADDYY)—have relatively stronger footwear segments. Under Armour, The Gap, VF Corp., and NIKE make up ~5.26% of the SPDR Consumer Discretionary Select Sector ETF (XLY).

Pricing

Apparel is still Under Armour’s core category. The company owes its origins to its trademark moisture-wicking technology used in sportswear.

Now, Under Armour is looking to push products over a wide array of price points. The brand’s strength gave the company better leverage to set higher selling prices in innovative apparel products—for example, ColdGear Infrared, Storm, and Charged Cotton. At the same time, new products—like MagZip launched in 2014—are targeted at customers seeking value.

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