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Under Armour’s International Plans to Drive Top-Line Growth

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Under Armour’s overseas business is a key growth driver in 3Q15

Under Armour’s (UA) international segment is growing way faster than its North America operations, partly due to its significantly smaller size. Sales grew 92% year-over-year to $270 million in 2014, accounting for 9% of the sales. In comparison, overall revenue grew 32.3% to $3.1 billion.

In 3Q15, UA’s higher growth rate in international sales is likely to elevate the company’s overall growth rate. UA has embarked on an aggressive international store expansion plan, with a focus on specific markets that are expected to generate better top- and bottom-line growth. Expansion and brand awareness aim at premium distribution channels and locations.

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Strategic partnerships and sponsorships

UA has also been active on the sponsorship front, signing deals that make the most sense from a geographic and categorical perspective. The company recently inked a shop-in-shop partnership deal with SportScheck, Germany’s largest sporting goods retailer. It also signed deals in São Paulo, Brazil, the Welsh Rugby Union, German football club FC St. Pauli, and Austria’s ski team in 2015.

Future growth

The international segment is expected to post growth at a CAGR[1. Compounded annual growth rate] of ~50% for 2014–18, according to the company. At its 2015 Investor Day, UA unveiled a three-tier distribution model that would see 80% of its retail (XRT) (RTH) locations outside of North America by 2018.

At the end of 2Q15, UA had 20 doors outside of North America or 12.5% of the total. In contrast, peer Nike (NKE) had ~63.6% of its stores outside the US at the end of fiscal 2015.[2. Fiscal year ended May 31, 2015]

Other firms in the industry, like Lululemon Athletica (LULU), are also expanding aggressively outside of the United States, particularly in Europe and Asia. The company had 98 stores, ~29.2% of its footprint, located outside the United States, as of August 2, 2015.

Under Armour and Nike together constitute 2.7% of the portfolio holdings in the First Trust Consumer Discretionary AlphaDEX(R) Fund (FXD) and 0.59% of the holdings in the SPDR S&P 500 ETF (SPY).

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