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Why Under Armour Has Been Eyeing New Connected Fitness Streams

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Under Armour’s Connected Fitness update at its 2015 Investor Day

Under Armour (UA) spent over half a billion dollars snapping up connected fitness app companies Endomondo and MyFitnessPal over the past year. Besides the e-commerce opportunity we discussed in the last article of this series, these purchases on its proprietary platform Under Armour Record provide a strong base to drive sales in other categories as well as open new categories.

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User growth

Under Armour Record has over 150 million registered users, and they’re growing at a staggering rate of over 100,000 per day worldwide. Higher athletic engagement implies more use of its gear and therefore more sales. Going by the current rate, we see that UA Record would have about 385 million registered users by 2018.

New market opportunities

Health-tracking facilities also provide UA the opportunity to pursue the $2 trillion food and nutrition market, the $8 trillion health and fitness market, and the $250 billion sports apparel market that UA’s already participating in.

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Premium opportunities

UA’s also going after the advertisement market in a big way on its platform. It also launched premium services. UA’s MyFitnessPal Premium Service is the bestselling app in the health and fitness category and one of the top grossing apps overall in the iTunes (AAPL) store. These services are likely to scale up, providing new revenue streams.[1. According to comments by Robin Thurston, chief digital officer, UA]

Growth in wearables

According to the IDC, the global market for wearables grew ~223% year-over-year in 2Q15. Fitbit (FIT) was the market leader in terms of shipment volume, with a 24.3% share. Apple (AAPL), debuting on the list for the first time, immediately captured 19.9% of the market with the launch of its Watch. Xiomi, Garmin (GRMN), and Samsung (SSNLF) rounded off the top five.

In 2015, one in every eight purchases of a fitness tracker is projected to sync to UA’s platform.[2. According to comments by Robin Thurston, chief digital officer, UA] UA can also leverage the growth in the wearables market. This would also provide UA with additional opportunities to increase its user base and grow its top line.

AAPL and UA together constitute 3.8% of the portfolio holdings in the SPDR S&P 500 ETF (SPY).

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