Under Armour has taken its cue from Lululemon Athletica inc. (NASDAQ:LULU), which has made fortunes selling premium women’s yoga outfits. The latter company, which sells tank tops for $60 and leggings for $90, has evolved women’s athletic outfits into a fashion statement in casual wear. In the process, it tripled its sales in the past three years.
While analysts still expect revenue to rise by 21.5% to $1.67 billion this year and by another 21.4% to $2.02 billion next year, Lululemon Athletica inc. (NASDAQ:LULU) is currently on a back foot due to negative publicity over its sheer yoga pants. And Under Armour is trying to cash in on this opportunity and has launched its “we’ve got you covered” campaign.
The company’s lower price points are also an advantage over Lululemon in some markets. Apart from the Studio Yoga line, Under Armour’s sports bras are gaining popularity. The women’s focus is clearly visible in the company’s new test store in native town Baltimore, which has cheerful colors and more emphasis on the ladies section. So over the coming years, women’s wear is going to be a big push area.
Innovative platforms
The final strategy for fueling growth is building innovative product platforms. Under Armour’s strategy for leveraging its technological innovations is beginning on a small scale and then eventually, depending on the success of the product, expanding it into multiple categories.
So when it introduced its Storm brand, which uses a waterproofing technology, in 2011, it started from a small base, with business worth $50 million. In 2012, the company expanded this to outerwear, fleece, and golf apparel and doubled its revenue to $100 million. This year, Storm is making its way into all kinds of product lines including apparel, footwear, and accessories. Revenue is expected to climb to $225 million.
Ultimately, Storm and Charged Cotton, another platform introduced in 2011, will account for $500 million in revenue by 2016. And that is not all. Under Armour has a full pipeline of innovations including Coldgear Infrared, Vent heat gear, Cold Black, Scent Control, etc.
Parting thoughts
In some ways Under Armour reminds us of Nike in its early years in the ‘70s. While only time will tell if we have another Nike in the making, one thing is for sure, and that is Under Armour is growing fast. Without being too hasty, the company is deciding on solid strategies that can trigger big growth. The international expansion, women’s wear opportunity, and product innovations are all well-planned moves and make us confident about its future prospects.
Gaurav Basu has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica, Nike, and Under Armour. The Motley Fool owns shares of Nike and Under Armour.
The article This Is One Company That Can Become Really Big originally appeared on Fool.com and is written by Gaurav Basu.
Gaurav is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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