Under Armour Resonates with Customers
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Under Armour (NYSE: UA) recently reported a second quarter profit increase of 6.8%. This increase was the result of sales growth across all segments, led by footwear, which experienced a 44% surge. Accessories and apparel also experienced double-digit gains, which led to sales and earnings exceeding Wall Street’s expectations, although higher marketing expenses did have an effect on bottom-line growth. The company is continuing to build on its 2011 success when net sales climbed 40% to $1.44 billion.
A large part of Under Armour’s success has to do with its ability to understand and resonate with its customers. Product launches that highlight performance aspects of their clothing and fabrics have proven successful for the company. In particular, Under Armour has been gaining momentum in the footwear segment, where it had previously languished; this is due in part to the release of a new lightweight running shoe, the Spine. The company has also been focused on winning over female customers through their sports bras and yoga apparel. Under Armour touts a heavy exposure to the U.S., which is seen as a competitive advantage over Nike (NYSE: NKE) with their more international clientèle.
Nike is one of Under Armour’s largest competitors. Nike still has a loyal fan base, but these days the company is more akin to a style icon than a performance-driven company. Nike is losing its market share in the performance market, as other companies such as Under Armour are focusing on the core athlete with innovations in materials. Also, Nike seems to be losing its U.S. base as it focuses its efforts on selling low-cost products for high profits in emerging markets. They have also faced fire for labor conditions and practices in manufacturing facilities. The company is slowly losing their appeal in the U.S.
Also, there are smaller companies that choose to focus on niche markets. These focused companies have had much success with sport-specific athletes. For the performance apparel market, bigger isn’t always better. Nike appears to be focused on growth and revenues. Their product line has little innovation and remains greatly unchanged. Under Armour, however, provides new fabrics that garner to the performance-driven consumer. Under Armour’s success has much to do with how well its product line resonates with its customers. As Nike fades into a style icon from the past, Under Armour is becoming a functional aspect of the wardrobe.
MaryPosey has no positions in the stocks mentioned above. The Motley Fool owns shares of Under Armour. Motley Fool newsletter services recommend Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
