Under Armour (UAA) Gains From DTC Unit, Operating Strategies

With relaxation in pandemic-led curbs and vaccinations reaching more people, socialization is back in the picture. Consumers are resuming their shopping habits and spending more on apparel items, especially outdoor wear. Renowned sports apparel and footwear retailer, Under Armour, Inc. UAA, has been gaining from such trends. The company’s improved operating model, strength in direct-to-consumer (DTC) business as well as investments across product and marketing are helping it meet strong demand. These trends have favored the company’s second-quarter 2021 results, with the top and the bottom line improving year over year.

Shares of this Zacks Rank #2 (Buy) stock have increased 88.6% in a year compared with the industry’s rise of 37.8%. That said, let’s take a closer look at the factors supporting the company’s performance.

Strong DTC & International Businesses

Under Armour has been trying to boost its DTC business through store expansions and enhancements to its e-commerce platform. During the second quarter, direct-to-consumer revenues surged 52% to $561 million buoyed by robust growth in owned and operated stores. The company plans to continue investing in digital capabilities to drive growth in the DTC channel.

Under Armour continues to seek opportunities for increasing its global footprint and market share. It has rolled out e-commerce platforms in countries like Mexico, Australia, New Zealand and Chile. During the second quarter, revenues in the international business surged 99.6% (up 84.1% on a currency-neutral basis) to $446 million. Within the international business, net revenues from Asia-Pacific and EMEA increased 56.1% and 132.5% to $192.4 million and $207.2 million, respectively. Revenues from the Latin America region soared 317.3% to $46.5 million.

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Strategic Growth Efforts

Under Armour is progressing well with its multi-year transformation plan. The company is focused on strengthening its brand through enhanced customer connections, effective innovations and strict go-to-market processes. The company strives to boost its operating model as well as return greater profitability and value to shareholders. Its long-term growth strategy is based on investing in own stores and digitization to directly reach customers along with selling more inventory at full price.

Speaking of innovations, Under Armour successfully introduced the Project Rock collection, Meridian Pant, Infinity Bra, UA SPORTSMASK, the HOVR Sonic, Machina, Phantom 2 and the Breakthru. The company is also optimistic about its new platform, UA Flow. It makes use of data and analytics capabilities to understand consumer behavior as well as drive brand interest across categories like training and running.

Encouraging View

Under Armour’s strong brand image and offerings, solid market presence as well as efficient e-commerce business should continue aiding its performance. Favorable market demand conditions are also likely to remain an upside. The company provided an optimistic view for fiscal 2021. Management anticipates full-year 2021 revenues to increase at a low-twenties percentage rate. It envisions adjusted earnings in the band of 50-52 cents a share, suggesting an improvement from a loss of 26 cents in the prior year. 

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Columbia Sportswear Company COLM, flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 33.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

GIII Apparel Group, Ltd. GIII, also with a Zacks Rank #1, has a long-term earnings growth rate of 11.6%.

Skechers U.S.A., Inc. SKX, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 34.5% in the last four quarters, on average.

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