Running head: ANALYSIS OF UNDER ARMOUR, INC.

Analysis of Under Armour, Inc.

Author

Author affiliation
ANALYSIS OF UNDER ARMOUR, INC. 2

Analysis of Under Armour, Inc

Introduction

Adoption of various strategies in order to remain competitive in the market is important

regardless of their economies of scale (Glancy 2016). However, different companies use various

competitive strategies depending on the nature and competition of the industry that they operate.

Those companies that enjoy economies of scale utilize price skimming, product differentiation,

diversification as well as expansion to operate in foreign market with the aim of gaining

competitive advantage over their competitors in the market. All these strategies are aimed at

improving the market share of the company which improves its profitability and productivity.

For example, diversification enables the company to produce a wide range of products hence

increasing the available markets by meeting the expectations of the company (Lustig et al.,

2015). In addition, other strategies which includes price skimming and penetration allowing the

companies to lure and maintain customers hence increasing their market share.

The main method of determining the effectiveness of the competitive strategies of the

company is through quarterly or annually assessment of its performance (Hlavacs and Christhilf,

2015). The objective of this paper is to analyze the Under Armour Company which produces and

distributes sports clothing as well as accessories in the United States and the world. This paper

starts with the analysis of the mission and vision statement of the Under Armour, Inc and then

provides a detailed analysis of the companys internal and external environments. Possible

options and recommendations are discussed in the final stages of this paper.
ANALYSIS OF UNDER ARMOUR, INC. 3

Analysis of Under Armour, Inc

The brief overview

The Under Armour, Inc. is based in Baltimore, Maryland. This is an American sports

clothing, accessories and footwear Company which was established in 1996. The company has

about one hundred and forty house factories stores in the North America with over ten brand

house. The company distributes its products through websites, retailers, online shopping and

other independent distributor who distribute the company products to different countries. Under

Armour Inc. has revenue that is approximated to be over five billion dollars as at the close of

2016. This marks twenty five percent increases in the company revenue when compared to the

previous years returns. The company is ranked among the top ten cloth producing companies in

America and is one of the new entrants in the clothing industry that are making great strides.

Analysis of Under Armour, Inc Vision and Mission

Just like any other successful company, Under Armour, Inc. has a well defined mission

and vision statements which has ensured the company remain focused on fulfillment of its

objectives and achieves its short-term and long-term goals. The vision statement of the company

is to Empower Athletes Everywhere (Dombrow 2013). This vision statement contains the

recommended wording of the suitable vision statement and is built on the principal of

performance with purpose. The outstanding points of the company vision statement are customer

satisfaction, corporate social responsibility and sustainability. The vision statement shows that

the company has effectively integrated sustainability and corporate social responsibility in its

business activities and operations.

ANALYSIS OF UNDER ARMOUR, INC. 4

The mission statement of the Under Armour, Inc. is to Make All Athletes Better through

passion, Design and relentless pursuit of innovation. This mission statement is well-structured

and contains the recommended number of words which is less than ninety nine words for a

suitable mission statement. The main focus of this mission statement is to ensure customer

satisfaction. Therefore, the main elements that are included in the mission statement is

commitment to serve the customers all over the world and improve affordability of the company

products. Under Armour, Inc. just like other companies focuses on the improvement of product

to ensure safety of athletes as well as other users of their products. However, Under Armour, Inc

can still improve its mission statement by including more information regarding its specific

approaches and strategies towards achieving the set goals and vision. Nevertheless, the vision

statement is well defined as it includes the goals of Under Armour, Inc. of empowering all

athletes everywhere.

Internal assessment

Financial performance of Under Armour, Inc

Financial performance is one of the key factors in the internal assessment. The financial

performance of Under Armour Inc. has steadily improved over the last four years (Coates 2014).

In December 2015 the company recorded net revenue of 3.96 billion dollars up from 3.08 billion

dollars in 2014 which shows the good performance of the company especially for the medium

company like Under Armour, Inc. the table below shows the financial performance of Under

Armour, Inc. between 2012 and 2015

Table 1: Analysis of Under Armour, Inc. Financial Performance

ANALYSIS OF UNDER ARMOUR, INC. 5

Financial performance ($) 2012 2013 2014 2015

Revenue 1.83B 2.33B 3.08B 3.96B

Cost of revenue 912.54 1.14B 1.50B 1,96B

Gross Operating Profit(GOP) 922.38 1.19B 1.58B 2.01B

Administrative, selling and general expenses 670.60 871.57 1.16B 1.50B

M M

Research and Development 0.00 0.00 0.00 0.0

Operating income before D & A 251.78 315.65 426.05 509.49M

M M M

Depreciation and Amortization 43.08M 50.55M 72.09M 100.94M

Interest Income 0.00 0.00 0.00 0.00

Other Income - Net -0.73M -1.17M -6.41M -7.73M

Special Income / Charges 0.00 0.00 0.00 0.00

Total Income Before Interest Expenses 208.62 263.93 357.55 401.31M

M M M

Net Income From Total Operations 128.78 162.33 208.04 232.57M

M M M

It is evident from the above income statement that the financial performance of the Under

Armour, Inc. has been rising exponential since 2012 (Glancy 2016). The company had revenue

of 1.83 billion dollars in 2012 which has increased to3.96 over the subsequent financial years.
ANALYSIS OF UNDER ARMOUR, INC. 6

This exponential financial growth may be as a result of increased marketing strategies of product

diversification which has served to increase the market outreach of the company.

Profitability, Ratios and Trends analysis of Under Armour, Inc

The company generally has good ratios as shown from the financial performance table.

By use of the Under Armour, Inc. net revenue, gross profit, net income, operating profit. Total

assets and the shareholders equity for the year 2015 the important profitability ratios can be

calculated as shown in the table below.

2011 2012 2013 2014 2015

Revenue (Million dollars) 1,473 1,835 2,332 3,084 3,963

Operating income (Million 163 209 265 354 409

dollars)

Net Income (Million dollars) 97 129 162 208 233

Operating Cash Flow (Million 15 200 120 219 -44

dollars)

Working Capital (Million 506 651 702 1,128 1,020

dollars)

The table above reveals that the working capital exponential increased from 2011 to 2014

and declined steadily in 2015.

Gross Profit Margin = 100 Gross profit Net revenue

= 100 34,672 3,963 = 48.1%

ANALYSIS OF UNDER ARMOUR, INC. 7

Operating profit margin = 100 Operating profit Net revenue

= 100 8,353 3,963 = 10.3%

Net profit margin = 100 Net income Net revenue

100 233 63,056 = 5.9%

Return on Investment (ROE) = 100 Net income Total s h are h olders ' equity

= 100 5,452 233 = 12.2%

Return on Assets = 100 Net income Total Assets

= 100 233 9,667 = 15.4%

The table below shows the key ratios and profitability analysis of Under Armour, Inc.

from 2011 to December 2015.

Table 2: Profitability and key ratio analysis of Under Armour, Inc

Profitability Ratio 2011 2012 2013 2014 2015

Return on sales Gross Profit margin 48.4 47.9 48.7 49.0 48.0

(percentage)

Operating Profit margin 11.1 11.4 11.4 11.5 10.3

(percentage)

Net profit margin 6.6 7.02 7.0 6.8 5.9

(percentage)
ANALYSIS OF UNDER ARMOUR, INC. 8

Return on investment Return on Equity (ROE) 17.1 17.7 17.4 17.3 15.4

(percentage)

Return on Assets (ROA) 12.2 12.4 11.9 11.3 9.4

(percentage)

Return on invested Capital 16.2 16.2 15.6 14.7 12.2

The table above shows that the gross profit margin of Under Armour, Inc. increased from

48.74 percent in 2013 to forty nine percent in 2014 although it declined in 2015 to forty eight

percent. This depicts that the capability of the company to cover its operating expenses as well as

other expenditures increased between 2013 and 2014 and further projected growth was witnessed

in 2016. The Return on Equity also increased between 2013 and 2014 however, it dropped in

2015. In addition, the company witnessed bad ratios as the operating profit margin and the net

profit margin ratios were unstable between 2011 and 2015. The companys return on Equity

ratios was unstable between 2011 and 2015. Its ROE also dropped considerably from 2014 to

2015 after a slight improvement from 2013 to 2014.

Financial growth and leverage trends

The financial position of Under Armour Company has increased by thirty one percent

during the last quarter of the 2015 financial year (Dombrow 2013). This represented an increase

in its revenue to 1.17 billion dollars. The overall growth of the company during the very year was

twenty eight percent with the company earning revenue of 3.96 billion dollars. This represented

the highest net revenue earned by the company. From this trend the company anticipates the net

revenue of 4.95 billion dollars representing twenty five growth relative to the previous years

revenue. It is forecasted based on the previous financial performance for five years it is expected

that financial position will continue to grow at a rate of 24.13 percent yearly. Therefore, the
ANALYSIS OF UNDER ARMOUR, INC. 9

Under Armour, Inc.s projected financial growth over the next four years is represented in the

table below.

Figure 1: Under Amours Projected Financial growth.

Projected Financial Growth

40.00%
35.11%
35.00%
29.27%
30.00%

25.00% 24.13%

20.00%

15.00%
9.36%
10.00%

5.00%
0.20%
0.00%
2016 2017 2018 2019 2020

The Under Armour, Inc. improved significantly to 0.46 during the first quarter due to

repaying its liabilities of approximately -34.47 percent. This is below the companys average

leverage ratio and the leverage may increase even further in the subsequent financial years.

Table 3: Under Armour Inc.s Leverage trends between 2011 and the first quarter of 2016

Year 2011 201 2013 2014 2015 2016 (1st Quarter)

Leverage ratio 1.4 1.4 1.5 1.6 1.7 0.5

Under Armour, Inc. Stock performance and the views of stakeholders

 ANALYSIS OF UNDER ARMOUR, INC.
10

The Under Armour, Inc.s stock has performed well in the last five years that has attracted

many shareholders in order to purchase shares. The company currently sells its stock at 39.75

dollars although its stock value may reduce as a result of its increased desire for growth, recent

acquisition of Endomondo, expansion to international markets and MapMyFitness since these

strategies require additional investment and expenditure. Under Armour has been increasing its

revenues by over twenty percent for the last five years which is impressive. This shows that the

company has the ability its debt low and reinvests most of its money into new products. In

addition, Under Armour has not been paying dividends which show stockholders have

confidence with the operations of the company and reinvestment decisions.

The Under Armours strengths and weaknesses

The company main strengths is that it has recorded high growth rates for the past five

years. The revenue of Under Armour has increased steadily from 2010 and the revenue is

forecast to increase further in the future. Under Armour has maintained its brand and launched

conspicuous marketing campaigns, top profile endorsements and publicity blitzes which will

ensure that the brand becomes a household name throughout the world.

Nevertheless, the company enjoys a strong customer loyalty hence increasing its overall

sales which is strength of Under Armour. The positive response garnered indicates that the

company has already established a strong relationship with its customers (Dombrow 2013).

Another strength of Under Armour is that it is financial strong which help it to address any

emerging problems for example, a dip in profit would not ground the company.
 ANALYSIS OF UNDER ARMOUR, INC.
11

The major weakness of Under Armour is that the company is reluctant to establish itself

across the world like their major competitors in the market (Clayton 2015). This can be

witnessed in the revenue realized from various countries of the world. Unlike its competitors

who earn a sizeable proportion of its revenue from all over the world, Under Armour gets a large

chunk of its revenue from North America. For example, the company recorded ninety percent of

its revenue from North America in 2013. In addition, the company does not manufacture its own

products and depend solely on its suppliers making it vulnerable to disruptions in the supply

chain where they lack control. Under Armour also has a limited line of product only restricted to

male sportswear which forces the youths and women to consider other companies. Finally, the

Under Armour incurs high cost compared to its competitors because the company cannot reduce

its cost causing it to realize low profit margins.

Under Armours market position in relation to the competition

Under Armour was founded in 1996 and it is younger when compared to its competitors

in the market, Nike and Adidas (Hlavacs and Christhilf 2015). This notwithstanding, the

company is among the top five companies in the world producing and marketing high quality

products in the world. The company was ranked fifth in 2014 after Adidas, Nike, ESPN and Sky

sports beating other established brands such as Reebok. The company dominates the two percent

of the sportswear industry because of its increased innovation in using fabric technologies. Nike

dominates eleven percent of the market while Nike dominates ten percent of the market.

Marketing strategies used by Under Armour, Inc.

 ANALYSIS OF UNDER ARMOUR, INC.
12

Under Armour uses marketing mix to eliminate stiff competition in the sportswear

industry to market its products to its customers (Glancy 2016). This strategy allows the company

to exploit all the means available to increase its market outreach. The company uses product

improvement strategy to enter into new markets through continuous innovations. In addition, the

company uses online marketing strategies to reach younger generation customers. This entails

placing their advertisements on the social media page such as twitter and Facebook. Online

shopping which enables the customers from other countries to purchase products from Amazon

or the website of the company is another strategy which gives the company a competitive

advantage in the market.

Under Armour, Inc. boasts of excellent promotion and marketing strategy. The company

exploits any opportunity to showcase their brands (Lustig et al., 2015). Furthermore, the

company has an in-house marketing team which produces and design adverts as well as

marketing campaigns in order to promote the growth of the company. The company also

sponsors teams and teams making the customers to be enlightened about the product. The

company spent about one hundred and sixty eight million in 2011 in marketing activities.

Moreover, the company has liaised with retailers to showcase their products at the retail stores as

well as opened their own retail stores.

External Assessment

Under Armour major competitors and how they compare

The major competitors of the Under Armour, Inc. are the Adidas and Nike who control a

large sportswear market. The other competitors that pose stiff competition to the company
 ANALYSIS OF UNDER ARMOUR, INC.
13

include Puma, VFC, Reebok, Sports Network, Gildan and Yankees Entertainment (Whittington

et al., 2014) Despite being young in the industry, Under Armour is ranked fifth in the world way

ahead of most of its competitors in the market. The company has a room to increase its size

through diversification of its products and exploration of the new markets.

Opportunities and threats available for Under Amour, Inc.

Under Armour has a small market share for the footwear products which shows that the

company has an opportunity of investing more in the sector. It is important for the company to

allocate more capital resources in the production of tennis, basketball, rugby, golf and tennis

footwear since most of the company product target athletes as potential customers. The company

can also use direct-to consumer distribution to penetrate the market and boast its sales. The

company relies on the retail stores, other sportswear outlets and online stores as the distributers

and sellers of its products (Hlavacs and Christhilf 2015). These strategies have proven effective

for the oversea markets. The company may explore direct selling methods to the local customers

in America. The company is focused in male athlete sportswear and has an excellent opportunity

to increase demographic outreach by producing and distributing sportswear for the children and

women in order to increase market share.

Under Armour faces threats from the more established and better performing companies

such as Adidas and Nike. These companies are continuously expanding their market share which

is a threat to Under Armour. In the event that economy recession is witnessed Under Armour

would be highly affected since the prices of its products is high and lack patent rights.
 ANALYSIS OF UNDER ARMOUR, INC.
14

The substitute products are flooded in the market which poses a major threat to this

company. Increase in the government tax rates compounded with the increase in interest rate will

pose a major threat to the company because of the additional financial burden. The customers

may alter their shopping lifestyle and shopping pattern which will be a threat to the performance

of the company.

Possible options/ possibilities

The company should expand its market into the new world markets by exploiting the

export opportunities. The company is focused on controlling the North America market and

exploiting other markets will help increase its revenue like its competitors. Under Armour should

increase the number of retail outlets by increasing the number of its outlet factories and issuing

favorable terms to their distributors so as to lure more distributors (Hlavacs and Christhilf 2015).

The company should consider increasing its product line in a bid to increase its target

market to eliminate perception that they are male dominated. The company should also consider

collaboration with fabric manufacturers in order to ensure minimal disruption in the supply chain

process and reduce the total costs at the same time.

Recommendations

The company can improve its activities by adopting different strategies in their business

activities. Based on the SWOT analysis of the Under Armour, Inc. the following

recommendations will ensure that the company achieves competitive advantage and penetrates

ne markets. Moreover, the recommendations will enable the company to fulfill its long-term
 ANALYSIS OF UNDER ARMOUR, INC.
15

goals of becoming the leading producer, distributor and marketer of the sportswear to athletes

cross the world.

1. Diversify business activities to minimize the risks of limited market penetration.

2. Improve market penetration in developing countries where there is low competition

where it may operate as a monopoly.

3. Increasing their product line and target market in order to avoid the perception that its a

male-oriented firm.

Reference List

Clayton, J. D. (2015). Penetration resistance of armor ceramics: dimensional analysis and

property correlations. International Journal of Impact Engineering, 85, 124-131.

Coates IV, J. C. (2014). Cost-Benefit Analysis of Financial Regulation: Case Studies and

Implications. Yale LJ, 124, 882.

Dombrow, D. (2013). U.S. Patent No. D690,091. Washington, DC: U.S. Patent and Trademark

Office.

Glancy Jr, M. M. (2016). U.S. Patent No. D761,542. Washington, DC: U.S. Patent and

Trademark Office.

Hlavacs, J., & Christhilf, G. (2015). U.S. Patent No. D727,609. Washington, DC: U.S. Patent and

Trademark Office.
 ANALYSIS OF UNDER ARMOUR, INC.
16

Lustig, D., Trippel, C., Pellauer, M., & Martonosi, M. (2015, June). Armor: Defending against

memory consistency model mismatches in heterogeneous architectures. In ACM

SIGARCH Computer Architecture News (Vol. 43, No. 3, pp. 388-400). ACM.

Whittington, W. R., Oppedal, A. L., Turnage, S., Hammi, Y., Rhee, H., Allison, P. G., ... &

Horstemeyer, M. F. (2014). Capturing the effect of temperature, strain rate, and stress

state on the plasticity and fracture of rolled homogeneous armor (RHA) steel. Materials

Science and Engineering: A, 594, 82-88.