So far, I have talked about how Georgetown students spend their time and money on food and technology, but what else do they do? Besides sleeping, studying and partying, one of students’ most time-consuming activities is exercising, whether that is competing at the varsity or club level, working out or simply playing sports recreationally.
When you see your peers exercising, what brand of clothing do you most often see them wearing? Most often, I would assume the answer is Under Armour.
Under Armour, Inc. has become one of the most popular makers of sports apparel. As a 2008 piece in The New York Times noted, Under Armour transformed the sports under-garment into a product for which consumers are willing to pay top-dollar. Its moisture-wicking compression shirts launched into the mainstream sports clothing market years ago and have become ubiquitous on fields and courts across the country. Although competitors like Nike — the sports apparel industry’s hegemon — have tried to copy Under Armour’s tight-fitting clothing, it’s Under Armour’s compression gear that remains the most popular.
Its success has stemmed from multiple sources. Under Armour has branded itself as a cool, performance-oriented company with its intense “Protect This House” and “Click Clack” commercials featuring all-star professional athletes. In addition, the company offers three lines of products — HeatGear, ColdGear and AllSeasonGear — that attract customers during all seasons. Furthermore, the high quality of the merchandise and the Under Armour brand name allow the company to charge more for its products than its competitors do. Seeing the Under Armour logo on a piece of clothing makes one think it is high-performance gear, illustrating the strength of its brand name.
In 2010, the company posted its first revenue of over $1 billion. While crossing the $1 billion mark was a noteworthy step for Under Armour, according to the Sporting Goods Manufacturers Association, the sports apparel industry has a $28 billion market. This means that Under Armour controls less than 4 percent of the market and has enormous potential to grow.
This begs the question: What could spur such growth?
Under Armour transcends gender, age group and sport type, a recent Wall Street Journal article asserted. Although the majority of its customers are male, an estimate from the article said that female customers make up about 30 percent of the company’s sales. Regarding age groups, the company makes products targeting a wide range of athletes, from young boys and girls to professional adults. In addition, while most sport companies are associated with a single or a limited number of sports, Under Armour appeals to all athletes and can look to see its revenues rise from sales of various categories of sporting goods. Having started with shirts for college football, Under Armour has now tapped into a variety of sports markets that include country club sports such as tennis and golf, lacrosse and winter sports.
Furthermore, Under Armour can expect its sales made directly to shoppers to increase. Only one-third of the firm’s 2010 revenue resulted from direct-to-consumer sales .The majority of the company’s revenue came from selling its products to third parties like Georgetown’s local City Sports. Under Armour offers its merchandise to these stores at a lower price than it would sell directly to consumers. However, its direct-to-consumer sales rose 56 percent in the fourth quarter of the 2010 fiscal year. This is the result of increased online sales and the opening of Under Armour Specialty Stores. With more direct-to-consumer sales, the company’s profit margins will widen. Under Armour can look forward to these numbers to jump further, as it plans to open 25 new specialty stores in the first half of 2011.
More and more, it seems that people are wearing Under Armour apparel casually and not just for athletic purposes. Under Armour is looking to extend this trend and showcase its innovation with the launch of “Charged Cotton,” its new collection of men’s and women’s shirts and shorts made from newly created high-performance cotton. Credit Suisse estimated that the market for cotton shirts is five to 10 times greater than that for synthetic shirts, which gives Under Armour enormous room to expand and profit from its new line.
Overall, Under Armour is still a relatively small company with a bright future. It has a market capitalization of approximately $3.4 billion, which is only about one-twelfth the size of Nike, and offers potential for huge growth and large market share gains. Its brand power is also very strong; there is no sports brand that better appeals to our generation with its high-quality, innovative merchandise than Under Armour.
Matt Paragamian is a sophomore in the College. He can be reached at [email protected]. MoneyMojo appears every other Monday.
