Under Armour Needs to Move Faster in Europe



International sales spike for Under Armour

Under Armour’s (UA) international sales[1. Including sales from countries outside North America and other businesses] rose by 108% in 2014 to $288 million. But international sales outside of North America made up just ~9.3% of total revenue. The company also reported tripling its sales in key markets in the United Kingdom and Germany. That said, UA has its work cut out for it in Europe.

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Unlike global peers Nike (NKE), VF Corporation (VFC), Lululemon Athletica (LULU), and Adidas (ADDYY), UA doesn’t have a direct retail presence in the UK yet. It sells products through department stores such as John Lewis, at sporting goods stores, and online.

Though plans are afoot to expand big in Europe, it’s largely looking at distributors to grow its sales. UA’s product selection is more limited as a result, at least in these channels. The company is also forced to compete with the likes of Nike (NKE), Puma (PMMAF), and Adidas (ADDYY) in these channels, which are strong brands that have more recognition than UA has in Europe at the moment.

UA may need to establish a brand house store in London and other European cities to tell its own retail story. The lack of one may limit its ability to earn higher prices and margins. Direct-to-customer sales, which include sales made at company-owned outlets and online, typically earn both higher prices and margins.

Not having a dedicated retail destination also puts UA at a slight disadvantage when compared with its peers. It’s unable to take full advantage of sponsorship deals such as those with the English Premier League’s Tottenham Hotspurs, the Welsh Rugby Union, the Welsh rugby club Wasps, or the number one in British tennis, Andy Murray, runner-up at this year’s Australian Open.

Nike, Adidas, and VFC are part of the portfolio holdings of the iShares MSCI ACWI ETF (ACWI), which has 12.2% of its holdings invested in consumer discretionary stocks. NKE is among the top ten holdings in the SPDR Consumer Discretionary Select Sector ETF (XLY), with 3% weight. In comparison, ~0.6% of XLY’s holdings are invested in UA.


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