Under Armour and the Perfect Pair of Underwear
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After a long search replete with frustration and heartache, I have found it. Through trials and tribulations, self-doubt and pain, I have finally discovered the mythical object most men pursue for their entire life. The object of which I speak is the perfect pair of underwear. They are the Boxerjock, made by Under Armour (NYSE: UA), and they are simply a thing of beauty. As a boxer man from a young age, I have grown to an age where I feel a little more support is necessary. Not willing to go back to the dreaded tighty-whiteys, I thought boxer briefs would make a nice compromise. Most boxer briefs, though, are too short, hot, and uncomfortable. My boxer brief forays have all ended with me going right back to my trusted traditional boxers.
This was my status quo until the twenty eighth day of the second month of the two thousand and twelfth year of our Lord; the day my quest ended.
The Boxerjock (I prefer the 9" mesh) is lightweight, breathable, supportive, and cooling. The design and consideration bestowed upon such a common item says something about their maker, and this encouraged me to look more into Under Armour. Being that I am not an NFL athlete training for the Combine, I never gave UA much of a thought. When I work out, I actually enjoy sweating and I never thought I needed to "wick" it away off my body. I earned that sweat and I want to feel it. If, on the other hand, I need to shave one tenth of a nanosecond off my hundred yard dash so I can qualify for global athletic stardom, I can see why "performance gear" might be necessary. I never thought of every day being a "performance," and this is where, I think, Under Armour is headed.
Prior to my investigation, my impression of Under Armour was pretty much confined to what they call their "compression" line. This is exactly what it sounds like, super tight and what you see on so many athletes in training. But there is so much more to this company, they have three more types of fits- fitted, regular, and loose. In these fits, you can choose your material based on the temperature: heatgear, coldgear and allseasongear. Further, they are introducing a new type of material called ColdBlack. Apparently, this stuff does not absorb heat and actually keeps you cool in the sun (Would love some comments on this if anyone has tried this out).
Other developments include the expansion of the footwear line and growth in Charged Cotton (a waterproof material). Apparel still accounted for 80% of 2011 revenue, but footwear grew 43% and accessories (hats and bags) grew 149% to 7% and 9% of revenue, respectively. The company is obviously diversifying, and they are growing at the same time, without taking on debt. Revenue growth has been increasing at a steady clip:
CEO/Founder/Chairman/President Kevin Plank (Mr. Under Armour) said with the 2011 annual report that 2012 growth will come on the low end of 20-25%. With such an array of new product offerings seemingly going after the pragmatic, yet non-hardcore, athlete, this seems mighty conservative given previous years and the overall economic growth afoot.
Compare this to Nike (NYSE: NKE), where North American footwear sales (UA's market is 94% North America) grew 11% in 2011, and apparel grew 9%. In North America, Nike footwear sales account for 67% of revenue, and apparel 28%. Under Armour looks interested in grabbing some of Nike's estimated 43% market share. UA has some real challenges ahead in trying to convince potential shoe buyers that they know both shoes AND apparel, especially when a customer can usually find all brands under one roof and deck themselves out in the specialization of the company, Nike for shoes, Under Armour for apparel, etc...
This begs the question, is Under Armour missing the boat by focusing on wholesale distribution channels and not selling directly to the consumer? Nike Direct to Consumer accounts for 16% of North American sales and is growing, and the rapidly growing (31% revenue growth in Q3 2011, FY end 1/30) Lululemon (NASDAQ: LULU) sells all but 2% of its products through its own channels. We'll have to wait and see if UA hits a wall when their expanding product line saturates their hardcore followers and they have to really start making some customer conversions.
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