Under Armour’s direct-to-consumer contribution rises
Under Armour (UA) reported a 33% year-over-year increase in direct-to-consumer (or DTC) sales in 2Q15. DTC sales[1. Comprising sales from owned stores and the company’s websites] came in at 32% of net revenue, or ~$250 million. That’s up from $189 million, or 31% of sales, in 2Q14.
Sales growth in the DTC channel came about through both a larger store (XRT) footprint and e-commerce sales. UA’s store count increased by 25 year-over-year to 160 in 2Q15. The largest UA Brand House on Chicago’s Magnificent Mile opened in 1Q15. Plus, the company opened other Brand House stores in the Mall of America, Minneapolis, and in Indianapolis and Orlando in 1H15.
Under Armour doesn’t report its web sales. However, the company did disclose that its e-commerce traffic rose by 300% for basketball products and its web sales by 60% for golf products. Followers to the company’s Instagram account shot up during the high-profile NBA finals. The brand gained more followers during that period than in the whole of 2014. It also launched new websites in Thailand, Austria, Ireland, Belgium, and Portugal in 2Q15.[2. As per comments by Kevin Plank, Under Armour’s CEO]
Both basketball and golf products have benefited from the success of Under Armour’s high-profile endorsees, Stephen Curry, the NBA 2014–15 MVP award holder and relative rookie Jordan Spieth, with four PGA titles in 2015. And, as we mentioned in the previous article of this series, the company’s planning to add about a 100 new Brand House stores in 2015. Despite most of these new stores coming about via partnerships, this growth should result in further upside to DTC sales and improved profitability.
A higher following on Instagram is also a great enabler of web sales. As of May 2015, Under Armour (UA) ranked sixth in terms of Instagram following among sports brands, with ~0.9 million followers.[5. Source: L2] Rival Nike had two of the strongest top-ten sports brands, number one with over 15.4 million Instagram followers. Converse came in at number four, with ~1.8 million followers. Adidas (ADDYY), with over 4.1 million followers, was second. Vans, part of VF Corporation (VFC), was third with ~2.8 million followers.
NKE, VFC, and UA together constitute ~0.5% of the holdings in the iShares Russell 1000 ETF (IWB).