Analyzing Under Armour’s performance in overseas markets
Under Armour (UA) derived ~11% of its sales from outside the United States in 2Q15, or ~$89 million. Its international sales more than doubled in 2Q15 on a currency-neutral basis and grew 93% year-over-year (or YoY) on a reported basis. EMEA[1. Europe, the Middle East, and Africa] accounted for half of overseas sales, with the balance of sales being clocked about evenly in Latin America and Southeast Asia[1. According to Brad Dickerson, Under Armour’s CFO and COO].
International sales benefited from new markets in 2014, particularly in Latin America, Southeast Asia, and China.
Under Armour announced the opening of its 17th international office in Germany on July 23. The company also announced four new shop-in-shops at SportScheck, Germany’s largest sporting goods retailer, slated to open by the end of 2015. A number of regional sponsorship deals were also announced including:
- a multi-year sponsorship deal with German football club FC St. Pauli
- a two-year contract extension with Austria’s ski team, as well as individual endorsements with two team members.
International distribution model
Most international sales take place through distributorships or partnerships. Under Armour also has an e-commerce presence in several markets, sometimes in countries where its products aren’t available in stores yet. Sales in Europe are mostly through distributors. Read more on Under Armour’s sales channels in Europe in our earlier article Under Armour Needs to Grow Faster in Europe.
The icing on the cake
Under Armour’s overseas exposure at 11% of sales is low compared to its cohorts. Peers Nike (NKE), Lululemon Athletica (LULU), and VF Corporation (VFC), derived 55%, 38%, and 30% of their respective revenue from outside the United States in their last fiscal years. But on the flip side, this meant that UA’s results have been least affected by the rising US dollar.
UA is targeting opening over 100 Brand House stores globally in 2015 and almost one a day this September. Most of these will be located in Latin America and Asia (75%). Most new stores in Asia—about 85%—will be via tie-ups with distributors, with most of these located in China[2. As per comments by Kevin Plank, Under Armour’s CEO].
UA, NKE, VFC, and LULU together constitute 1.1% of the portfolio holdings in the iShares Russell 1000 Growth ETF (IWF).