As a resident of Baltimore, it’s hard to read a local business journal and not notice the growth of Under Armor Inc (NYSE:UA) along the city’s waterfront.
You thought the pharaohs of ancient Egypt left their mark with massive building projects — CEO Kevin Plank is inspired to take UA to new levels, and bring Baltimore along with it.
And so far life has been good for Mr. Plank, Under Armour and UA stock. Since the current bull market started six years ago, UA stock has gone from $3.11 to $80. It’s up nearly 2,500%.
That return is nice chunk of change if you got in early. But does UA stock have more room to run?
I think so. In fact, you may be on the ground floor for Under Armour’s next metamorphosis, from avant garde apparel company to tech platform.
UA: The Core Business is Still Growing
Under Armour surpassed the $3 billion revenue mark in 2014 and the gains seem to come across the board. Here are the highlights from the analyst call back in February that show what drove that number:
- 2014 sales for the entire year rose 32% year-over-year to nearly $3.1 billion.
- 2014 saw a 30% increase in its core apparel business to $2.3 billion,
- Footwear saw a 44% increase to $431 million (and they now have NBA basketball star Stephen Curry as the face of its new basketball shoe).
- Accessories rose 27% to $275 million.
- Sales outside the U.S. skyrocketed 96% to $260 million.
As an apparel company, UA is still growing domestically and internationally. Actually, expect international growth to go through the roof in the next couple of years. In the words of Kevin Plank:
“We will strategically grow with our wholesale partners around the world, continue to build out the international brand house stores, going from 18 stores at the end of 2013 to 68 stores in 2014 and adding more than 100 doors this year.”
UA: More Than Just Apparel
Last week I saw that Plank was going to appear on CNBC’s Mad Money. Back in 2006, Jim Cramer told his viewers they needed to invest a little something in the Under Armour IPO. I think since it’s Mad Money’s 10th anniversary, Cramer was reminding us his home-run picks of the past.
As I watched, I noticed that the theme of the interview was not centered around the world of apparel but the technology sector — with Cramer even referring to UA as a “stealth technology company.” As Plank explained:
“Because we had this great healthy shirts-and-shoes business, we were able to build this new layer of adding digital to our business that will give us this new complexion that I think that presents us to be ready for the next decade of growth.”
What he was referring to the February announcement that UA had acquired two new apps, MyFitnessPal and Endomondo — paying $475 million and $85 million, respectively.
Combined with UA’s other software ventures of MapMyFitness and UA Record, the acquisitions gave Under Armour a social fitness network of 120 million users. These are the initial steps for UA to become the LinkedIn Corp (NYSE:LNKD) of the health and fitness industry.
Plank told Cramer that UA quickly added another 10 million customers to its digital network and has ambitions for much more. “With 130 million-plus people now on our platform…the first handshake they may have with the Under Armour brand may very well be a digital handshake, and we are very proud of that.”
UA’s Digital Platform Promotes Growth
UA’s digital platform is a great marketing vehicle. It allows Under Armour to get a specific insights into consumers, drive their buying decisions and create Under Armour loyalty.
As UA grows, so will the platform.
Second, let’s not forget that the data provided by this new network will also look attractive to other industries with similar interests. I can see UA monetizing this database down the road by creating relationships with the food and health and wellness industries.
Kevin Plank gets it. Under Armour has a vision where innovative apparel will unlock the door to an innovative tech company.
You may have missed out on UA stock during the IPO nine years ago. Don’t miss the opportunity again.
As of this writing, Jason Jenkins did not hold a position in any of the aforementioned securities.
