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Factors Likely to Keep Under Armour's (UAA) Momentum Alive in 2021

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The past year was dismaying for several apparel retailers, as stay-at-home practices amid the coronavirus pandemic eclipsed footfall across brick-and-mortar stores. Tighter pockets also compelled consumers to curb spending on luxury apparel items.  Nevertheless, some retailers, including sportswear companies like Under Armour, Inc. (UAA - Free Report) , have managed to stay afloat in troubled waters. In fact, consumers’ increased focus on fitness amid the pandemic, turned out to be quite an upside for sportswear companies. Markedly, sportswear players have been gaining from consumer’s inclination toward casual wear as well as athleisure apparel and footwear categories.

Under Armour is particularly gaining from growth in its footwear division. Additionally, the company is benefiting from strong digital presence. Such upsides are likely to keep adding gleam to this Zacks Rank #3 (Hold) company in 2021. Impressively Under Armour’s shares have surged 75% in the past six months compared with the industry’s rise of 37.3%.  The stock currently carries a Momentum Score of A. Moreover, the Zacks Consensus Estimate for sales for 2021 is currently pegged at $4.8 billion, indicating a growth of 12.2% from the prior year’s level.  That said, let’s take a closer look at the aspects acting as aces for the stock.

Strategic Growth Endeavors

In its last earnings call, management highlighted that footwear and women’s sportswear have continued to remain two of strongest growth drivers for Under Armour. Speaking of footwear, sales in this division increased nearly 19.2% during third-quarter 2020, buoyed by strength in the company’s run and train categories. The company is keen on boosting footwear offerings that are better aligned with consumers’ needs. Apart from this, the company is focused toward innovating new products in areas like women’s sportswear and intimate wear.

Under Armour is also striving to augment direct-to-consumer (DTC) and digital business channels. In its DTC business, the company is on track with efforts like store expansion initiatives and enhancement of its e-commerce platform. During third-quarter 2020, DTC revenues rose 17% to $540 million on strength in e-commerce. The company registered sturdy e-commerce growth globally, with sales up more than 50%. Speaking of digital strategies, the company’s MapMyFitness platform is a key growth catalyst, and so is its connected footwear business. Recently, the company concluded the divestiture of the MyFitnessPal platform to Francisco Partners. The move is expected to lower brand complexity and facilitate a sharper alignment with long-term digital strategies.

Under Armour also continues to seek opportunities for increasing its global footprint and market share. Notably, revenues from international business increased 17.7% (or up 17.1% on a currency-neutral basis) during third-quarter 2020.  

Additionally, the company is undertaking prudent measures to rebalance cost base. The company plans to continue pulling back on promotions and discounts in an effort to drive margins. Also, the company is planning to exit certain undifferentiated wholesale distribution channels, primarily in North America.

Wrapping Up

As we progress with 2021, visualizing life post pandemic, many of the habits picked up this past year are likely to stay. Consumers are likely to keep adhering to a health- and fitness-oriented lifestyle, which is expected to continue favoring the demand for athletic as well as casual apparel wear. Such trends along with well-chalked efforts to boost brand image, expand digital offerings, manage inventory and contain costs are likely to continue benefiting Under Armour.

More Stocks to Consider

Capri Holdings Limited (CPRI - Free Report) , flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 5.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Crocs, Inc. (CROX - Free Report) , with a Zacks Rank #2 (Buy) has a long-term earnings growth rate of 15%.

Skechers U.S.A., Inc. (SKX - Free Report) , also with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 22.1%, on average.

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