Analyzing Under Armour’s revenue performance
Under Armour’s (UA) revenue growth in 2Q15 accelerated to 28.5% year-over-year or $784 million. This revenue growth was propelled by footwear products, which grew 40.2% year-over-year to $154 million—higher than the company average. Under Armour’s revenue growth had come in at 25% in 1Q15.
Footwear sales sprint ahead
Footwear is a relatively new category for Under Armour. The company first started selling shoes in 2006. Footwear sales jumped on running sneakers performance and the success of the company’s first signature basketball shoe, the Curry One, named after NBA 2014–15 MVP Stephen Curry. Nike has several star basketball athletes on its roster with signature footwear lines, including Kevin Durant and Kyrie Irving.
However, despite Under Armour’s strong footwear performance, it’s still dwarfed by market leader Nike (NKE). Nike had a market share of ~62% in the US athletic footwear market.[1. Market share stats: Matt Powell, The NPD Group] Nike clocked footwear sales of $18.3 billion in fiscal 2015.
Sales mix and trends
Apparel revenue grew 22.7% year-over-year to $515 million. Apparel is a core category for Under Armour. Apparel constituted 65.1% of Under Armour’s total sales in 2Q15, down from 68.9% in 2Q14. Sales gains in apparel came about as a result of an enhanced assortment in base-layer, training, golf, and hunting clothing, according to Brad Dickerson, Under Armour’s CFO.
Under Armour holds the number-two position in the US activewear category with 6% market share in 1Q15, second only to Nike’s (NKE) 13%. US peer Hanesbrands (HBI) had a market share of ~3%. HBI’s new athletic wear range, Champion Life, is expected to hit stores this August.
Nike, Hanesbrands, and Under Armour together constitute 3.1% of the First Trust Consumer Discretionary AlphaDEX (R)(FXD). Nike, UA, and HBI together constitute ~0.6% of the holdings in the iShares Core S&P 500 ETF (IVV).