Analyzing Under Armour’s online sales projections from its 2015 Investor Day on September 16
Under Armour (UA) expects e-commerce sales to be the fastest-growing business over the next few years. The company doesn’t report web sales in dollar terms. However, Internet Retailer estimated its 2013 online sales at $220 million, ~9% of the total.
Growth projections and drivers
According to its 2015 Investor Day presentation on September 16, Under Armour expects a fivefold increase in online sales for 2014–18. It’s also expecting to increase its country-specific websites from 24 currently to 30 over this period.
A lot of the upside in e-commerce will likely be driven by higher traffic from the company’s Connected Fitness platform. Reported numbers from the Connected Fitness platform have been very positive. Sales have risen by 29%, while the average order value is 26% higher on the platform compared to traffic sourced from its e-commerce websites.
UA also sees explosive growth from mobile devices. Mobile traffic has grown to 57% of total e-commerce traffic in 2015 year-to-date. That’s up from 5% in 2011 and 28% in 2013. The company’s looking to raise mobile traffic fourfold over 2014–18.
According to comments by Jason LaRose, chief revenue officer, UA, the total business generated from mobile is up 120% in 2015.
Sharing digital content
As we discussed in Part 6, UA’s also sharing digital content and helping develop functionality for its partner wholesale accounts. According to Jason LaRose, chief revenue officer of UA, Under Armour is the top-searched brand in Cabela’s (CAB) website, one of UA’s wholesale partners for outdoor gear.
A higher percentage of sales from the web is both forward-looking and profitability-enhancing. Lululemon Athletica (LULU), which derived almost 18% of its total revenue or ~$0.3 billion from the web in fiscal 2015, has some of the best profitability margins in the apparel industry. This is partly due to a higher percentage of web sales and partly due to its vertically integrated model. VF Corporation (VFC) derived 3.6% of total sales from the online channel in 2014, or $0.4 billion.
UA and VFC together constitute ~1.8% of the portfolio holdings in the Consumer Discretionary Select Sector SPDR Fund (XLY).