Product and segment analysis
Under Armour’s revenue growth in its Apparel segment first dipped from the 30-plus range to 25% in 1Q15. It dipped to 19% in 2Q16. Coincidentally, during 1Q15, Connected Fitness recorded growth of 112.5% in its debut year and 73% in 2Q16 after five successive quarters of three-digit growth rates. In fiscal 2015, this segment formed only 3% of the total revenues compared to the Apparel segment, which constituted 71% of the total revenues. Footwear formed 17% of total revenues in fiscal 2015. In fiscal 2016, the Apparel, Footwear, and Connected Fitness segments form 61%, 24%, and 2% of total revenues, respectively.
The International business contributed 11% of the company’s total revenues in fiscal 2015. This figure rose to 15% in 2Q16. North America’s share dipped from 87% to around 83% for the same period.
The growth in Apparel was triggered by innovations like Microthread in running, training, and golf products. The Footwear business gained momentum from the Curry series in basketball, golf, and other sports categories.
Under Armour in China reached the $80 million mark in 2015 and is expected to reach revenues of more than $150 million this year. China’s e-commerce business recorded a year-to-date (or YTD) revenue growth of 157%, driven by a growth of 24% in women’s apparel. Women’s apparel formed 34% of the total Apparel revenue. China generated almost a third of the company’s total sales in the Footwear division while the rest of the world together chipped in less than 20% of total sales in 2015.
S&P 500 components Hanesbrands (HBI), L Brands (LB), Nike (NKE), VF Corporation (VFC), and Under Armour form 5.6% of the portfolio holdings of the Consumer Discretionary Select Sector SPDR Fund (XLY).
Fiscal 2016 expectations
Columbia Sportswear (COLM) is expecting revenues in the mid-single digits for fiscal 2016. Lululemon Athletica (LULU) is expecting revenue growth between 12% and 14% for fiscal 2016. Nike (NKE) has recorded a 6% growth in revenue during fiscal 2016.