Bullish Outlook for Under Armour Inc (UA)

Consumer spending in the US has been on a sharp decline in the last few years, as the economy is still feeling the lingering effects of the financial crisis. However, there are still a few retailers that have surprisingly reported a sharp growth in all business units. One of them is Under Armour Inc (NYSE:UA). The retailer has reported sharp growth in all the segments, as the total revenue for 2012 stood at $1.84 billion, marking 25% year on year growth. The company outdid all previous projections, which include its own guidance for 2012. The company experienced exceptional top line growth, as the net income also recorded a 54% growth from the previous year. Moving ahead, we expect Under Armour to increase its focus on international expansion, direct to consumer business and the footwear products. The 2013 outlook for the apparel retailer looks promising with an estimated growth of 20% to 25% in both net revenues and EBITDA. The stock seems all set to exceed all expectations.

Enhancing Core Business Segments and International Expansion

The company reported a huge growth in footwear and women’s products in 2012. Even though the market for these categories is highly competitive, Under Armour still has a huge potential to grow if it increases the distribution channels and continues the radical innovation in footwear technologies. In addition, the growth opportunities in the emerging markets like South America and Asia are extremely high due to increasing brand awareness and disposable incomes. Europe too provides several growth opportunities; however, emerging markets are relatively less saturated with slightly weaker competition from domestic retailers. Traditionally, Europe has not been a happy hunting ground for the American retailers, as the competition from the domestic retailer far too intense and the market structure is highly complex.

Competitors

Under Armour competes head on with likes of NIKE, Inc. (NYSE:NKE) and Adidas. Nike is among the largest sportswear retailers in the world, with a market cap of $39.3 billion. The company is the world leader in athletic shoes and sports equipment. It generates a high volume of its revenues through branded footwear; however, the apparel business is increasingly becoming a trademark for the company. Nike’s key revenue stream has always been North America, however it expects good growth from Europe as the economy starts to recover.

2012 revenues were approximately $24 billion, making it one of the most valuable brands in the world. The current brand equity of Nike is in excess of $10 billion. Similar to Nike, Adidas too is the second largest sportswear manufacturer in the world and the largest in Europe and Germany by a huge margin. Adidas is a German group with a presence around the globe. The company too prides itself on athletic footwear, bags and t-shirts. Adidas has a market cap of $19.5 billion, and it currently trades on both the NASDAQ and Frankfurt Stock Exchange.