U.S. Under Armour outlines its long term growth strategy

US Under Armour outlines its long term growth strategy

Under Armour, Inc. unveiled the next chapter of its long-term growth story at its biennial Investor Day meeting, highlighted by a 2018 net revenues target of USD 7.5 billion, representing a 25% compounded annual growth rate from USD 3.1 billion in net revenues in 2014


Kevin Plank, Chairman and Chief Executive Officer, stated, “For nearly 20 years, the Under Armour brand has been built on the promise to make all athletes better. Leveraging our foundation in innovation and enhancing the connectivity of our brand with consumers through Connected Fitness, we are better positioned than ever before to exceed consumer expectations as we evolve from a brand dedicated to changing the way athletes dress to one that will change the way athletes live. The investments we have made and will continue to make are a testament to the extended runway of growth we see ahead and provide us with the confidence in raising our long-term net revenues growth rate target from +22 % to +25 %. Building off of the incredible consumer demand we are experiencing for the brand, we firmly believe we are just getting started in our pursuit to become not only the definitive performance sports brand, but a truly great global brand.”

Hosted at its Global Headquarters in Baltimore, Under Armour management highlighted many of the Company’s strategies to continue strong growth in key areas of its business, including expanding its core businesses in Apparel, North America, and Global Wholesale as well as intensifying its focus on evolving its consumer-centric Sport Category structure. The Company believes these strategies and others will be significant to seizing opportunities and driving stronger growth in newer areas such as International, Footwear, Global Direct-to-Consumer, and Connected Fitness.

In addition to providing an update on its revenue goals, the Company provided a long-term operating income target of USD 800 million, representing a 23 % compounded annual growth rate from USD 354 million in 2014 and inclusive of the Company’s Connected Fitness acquisitions in early 2015. This anticipated performance includes a consistent gross margin of approximately 49 % as ongoing product margin opportunities and mix benefits from Direct-to-Consumer and Connected Fitness are offset by the higher mix of International and Footwear businesses. In addition, SG&A expenses are expected to grow modestly ahead of the Company’s revenue trajectory through 2018 to support ramping growth segments in areas such as Footwear and International, ongoing investment in areas such as Connected Fitness and Global Direct-to-Consumer, as well as infrastructure investments to support the long-term growth trajectory and enable improved long-term efficiency.

Below the operating line, the impacts of higher interest expense and share count dilution are expected to be offset by a reduction in the Company’s effective tax rate to the mid-30s by 2018, resulting in earnings per share growth that is approximately in-line with operating income growth.

Consistent with current year guidance, the Company expects to deploy capital at an elevated rate to develop the capabilities and capacity needed to scale the global business. The Company will continue to evaluate its capital needs through 2018 as it plans to spend between 8% and 10% of net revenues annually.   

Plank concluded, “Our vision to change the way athletes live requires that we also change the way we operate. We are in a unique time in our Company’s history with unprecedented brand momentum providing a much longer and wider runway of opportunity than ever before. With this visibility, we are moving decisively to take advantage of this moment in time and deploy resources that will drive near-term results, but more importantly, position us for success well beyond our 2018 targets.”

Under Armour, the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand’s innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitness(TM) platform powers the world’s largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal. The Under Armour global headquarters is in Baltimore, Maryland.


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