Bringing Tom Brady along to augment the message, Under Armour Inc. delivered a loud proclamation on its growth prospects last week at its 2013 Investor Day event in Baltimore. Officials predicted revenues would reach $4 billion by 2016, more than double 2012 levels of $1.83 billion.
The growth is expected to come across the business but would be particularly bolstered by ongoing efforts to capitalize on untapped opportunities in womens apparel, youth apparel and footwear as well as reaching customers outside the U.S.
At the start of the five-hour presentation, Kevin Plank, chairman and CEO, noted that at the companys last Investor Day held in June 2011, just after the company reached the $1 billion mark in 2010, management predicted revenues would double from 2010 to 2013. The company is well on its way to exceeding those goals with 2013 revenues expected to reach between $2.20 billion to $2.22 billion.
And while that revenue growth was strong, we believe it merely represents our foundation, the building blocks of what we see as a much larger and more diverse global brand, said Plank. Because what’s changed most in that time is frankly our reach. Our ability to speak to new consumers and bring them into our brand because we continue to deliver on that promise.
Overall, the $4 billion 2016 target represents nearly a 22 percent CAGR over the three-year period from 2013, in line with UAs long-term objective of 20 percent to 25 percent growth. But the growth drivers will somewhat change. To spell out how UAs revenue mix will evolve, the company detailed how much its key categories will change as a percent of sales from 2010 to 2016:
Men’s apparel is expected to still grow at very healthy double-digit rates, but overall the category will shrink from 53 percent of its total business in 2010 to 39 percent in 2016. This is due to other categories outpacing Men’s, as well as, to a lesser degree, the move to bring the hats and bags business in house in 2011;
Women’s apparel is expected to increase to 24 percent of total sales from 22 percent of total net revenues in 2010. As part of the apparel business, it will grow to a third by 2016 from 27 percent in 2010;
Youth apparel is projected to grow to 12 percent of sales in 2016 from 9 percent in 2010. In just apparel, youth is expected to represent 16 percent of revenues, up from 11 percent;
Footwear is expected to increase to 15 percent of revenues from 12 percent in 2010.
By channel, Direct-to-Consumer is expected to grow to 31 percent of sales from 23 percent in 2010 while International is expected to double to 12 percent of sales by 2016 from 6 percent. That leaves North American Wholesale shrinking from 70 percent in 2010 to 57 percent in 2016, although officials still expect strong double-digit growth at NA wholesale with double-digit growth seen at its top three accounts.
Its Mens apparel business has doubled since 2010, is approaching $1 billion in 2013, and expected to reach $1.5 billion in 2016. Both the Storm and Charged Cotton platforms are expected to reach $500 million by 2016, while ColdGear Infrared, launching this fall, holds similar potential to become a $500 million franchise, officials said. They also noted that all of these technologies launched after 2010. Another big launch is planned for
Armour Vent for Spring 2014 with other innovations in planning stages for 2015 and 2016.
In 2013, UA had two categories in Men’s that were over $100 million: Training and Baselayer. By 2016, four more categories will reach that level: Run, Golf, Underwear and Outerwear. Glenn Silbert, VP of mens young and accessories, said the extensions are authenticating ourselves in these sports and end uses, and are particularly important in establishing footholds for international growth.
Beyond performance innovation and a focus on the athlete with the help of its partnerships with NFL Combine and Tottenham Hotspur, Mens apparel and the apparel category overall will be supported by brilliant design and versatility overall, according to Henry Stafford, SVP of apparel, outdoor & accessories.
What do I mean by versatility?, he asked rhetorically to the investor crowd. Something that can be worn in the gym or around town. You know it and you see it and we are going to capitalize on it.
UAs Youth apparel business has doubled in only 2 years to a size well over $200 million, is expected to increase 50 percent this year, and is projected to reach $470 million by 2016. Silbert said UA is far and away, the #1 brand in boys. And this year, were taking over the #1 spot in girls. And what really excites us about this is that were not even scratching the surface. While we continue to grow in our existing space, we are seeing tremendous success in new distribution.
A UA Next campaign specifically targeting youth was launched this spring. Driving Youth going forward will be ongoing innovation such as UPF 50+ sun protection and fun technologies like product that changes color when exposed to the elements, said Silbert. Other key elements include reaching kids across all team sports, expanding girls overall, and a focus on key items.
Women’s will more than double its sales from 2010 to reach over $500 million this year, and is projected to reach $960 million by 2016.
Gwyn Wiadro, VP of Women’s, discussed how in approaching womens, the brand initially focused on that sharp point on-field athlete. It then shifted around 2009 to focus less on technical details and more on performance, beauty and style to expand the reach to women into yoga, boot camp, spin and other activities. To truly resonate with her, UA recognized it needed to become a mainstay purchase in a category critical to women and feels its done that with the success of the ArmourBra, which is tracking to exceed $140 million by 2016. That bra push has been expanded with the launch of the more feminine, Protegée.
Leanne Fremar , SVP and executive creative director for Women’s, added that UA Womens Run and Studio platforms are also growing nicely with each also projected to reach $140 million by 2016. The overal womens effort is being supported by a doubling in marketing investments toward women; as well as making the brand more accessible to women by bringing it to her favorite stores and her favorite studios. Investments are also being made in its design team in Baltimore and its new offices in New York City to assure UA is delivering trend-right product to the marketplace.
Surprising and delighting her with hot pops of fashion, trend right product that remains true to sport and giving her the stable of chic classic basics that she can pair everything back to is how collections are being built, said Fremar.
In Footwear, UA expects to nearly triple its business to $600 million in 2016 from 2010, said Kip Fulks, COO. To further support the category, UA has opened an office in Portland that will have over 20 people by the end of 2014. It also added a VP of sales in Footwear who had worked for Adidas.
In cleats, UA believes its the definite clear #2 in U.S. wholesale in football and baseball, with a goal of leading the cleat category by 2016, said Josh Rattet, senior director of team sports footwear. The Highlight , the number one football cleat at Eastbay that sells for $100, is being leveraged into baseball and lacrosse. While talked up less than other areas, Rattet promised really exciting things to talk about basketball in two years. Other footwear successes include sandals and slides, which are the #1 slide brand at Dick’s SG currently.
On the running side, the goal is to be among the top 3 brands in sporting goods by 2016. The strategy is to gain credibility in the category with the core authentic consumer, both the elite and everyday runner, as well as bringing out a steady suite of innovations. Footwear will look to build on the success of Spine, with the current Spine Venom particularly doing well in the marketplace. Said Jeanette Robertson, who heads up UAs Women’s and Next Youth Footwear, said, Weve currently surpassed some of our competitors in the channel that we are selling, and were already a top seller in the marketplace. So it’s a great base point for us to start.
Officials also unveiled the new SpeedForm running shoe, which features a seamless heel cup and is designed to mold to the runners foot. It is modeled after the way the company manufactures bras and other form-fitting clothes. The technology is based on space suits or the seat of a Formula 1 racing car, said Dave Dunbrow, senior creative director for footwear.
DTC is expected to become more profitable overall as e-commerce growth outpaces Factory House growth. E-commerce overall makes up 9 percent of sales and is expected to grow 35 percent compounded annually from 2010 to 2013. Factory House is transitioning from a unit growth story to a footage growth story with larger footprints in upcoming years being the focus. Specialty will be in test mode the next few years as officials dial in a model or models that potentially can be deployed on a broader global basis longer-term.
Internationally, with the exception of Japan, Under Armour’s market share outside of North America is still insignificant, said Charlie Maurat, president of International. In more mature and developed markets, UA expects to replicate the successful business model that already works well in North America with key accounts such as Dick’s SG in the U.S. and SportChek in Canada. It also sees opportunities in emerging markets such as Brazil, Mexico and Turkey with a fast-growing middle class with young and affluent consumers that are influenced by Western lifestyle and international brands.
Establishing footwear is seen as particularly important to growing internationally. Also a key component of overseas expansion is establishing a balanced rollout of controlled retail space with shop-and-shops, the launch of a UA franchise model and expansion of a limited amount of its own retail stores in selected markets all being planned.
