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Under Armour’s Upbeat Prospects for Direct-to-Consumer Sales

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Nov. 20 2020, Updated 5:02 p.m. ET

Revenue drivers for Under Armour

Consensus Wall Street analyst estimates project sales of ~$761 million for Under Armour (UA) in 2Q15. That’s about 25% more than in 2Q14. Revenue gains are likely to be spurred by higher sales in all channels—wholesale, retail, and e-commerce.

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Direct-to-consumer channel growth

Retail and e-commerce sales—DTC or direct-to-consumer sales—are, however, growing at a faster clip than the average growth rate at the company. DTC revenue rose from 11% of sales in 2007 to 30% of sales in 2014.

Under Armour plans to open more stores over the course of 2015. As UA expands product lines and increases retail square footage at existing stores, the direct-to-consumer channel is expected to benefit further.

Industry comparison

Although athletic apparel and footwear companies including Nike (NKE), VF Corporation (VFC), and Under Armour (UA) derive most of their sales from the wholesale channel, they’re increasingly focused on direct-selling channels. DTC sales comprised 30% of Under Armour’s revenue in 2014. Here’s how a few of its peers compare:

  • 23.1% of Nike (NKE) sales in fiscal 2015
  • 25.7% of VF Corporation (VFC) sales in 2014
  • 22.5% of G-III Apparel (GIII) sales in 1Q15

Under Armour increased its owned store count by 23 in 1Q15. These consist of UA Brand House stores and UA Factory House stores in the US and overseas. The company also opened its biggest Brand House store on Chicago’s Magnificent Mile last quarter.

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Online sales

The Web is an increasingly important source of both sales and brand marketing. Through NikeiD, Nike is undoubtedly the leader in designing digital campaigns and in product customization. However, Under Armour’s connected fitness purchases give it scale as the largest fitness community worldwide. These acquisitions give the firm a great platform to use the Web to drive both sales and global brand awareness.

Although Under Armour doesn’t disclose web sales figures, the online sales channel is the fastest-growing channel among its apparel retailer peers (XRT). Web sales as a percentage of total sales came in at ~12% for the Gap (GPS), 15.8% for L Brands (LB), and 17.8% for Lululemon Athletica (LULU) in their most last fiscal years.

The next article discusses UA’s prospects in the wholesale channel.

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