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Under Armour (UAA) Gains on Growth in E-commerce, DTC Business

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Although consumers’ altered shopping preferences due to the pandemic has made matters tough for several apparel retailers, few such as Under Armour, Inc. (UAA - Free Report) have managed to stay afloat on the back of prudent operational strategies. This renowned sportswear and footwear retailer is gaining from growth in e-commerce sales, which has been supporting growth in the direct-to-consumer (DTC) channel. Additionally, the company’s effective brand strategies, product innovations and cost containment efforts have been yielding. Well, shares of the company have gained 22.3% in the past three months compared with the industry’s decline of 1.9%. That said, let’s take a closer look at the aspects aiding this Zacks Rank #3 (Hold) company.

E-commerce & DTC Business are Key Upsides

Consumer’s inclination toward digital transactions has become all the more amplified amid the pandemic. During the fourth quarter of 2020, Under Armour witnessed 25% jump in e-commerce sales, which supported revenue growth in the DTC channel. During the quarter, the company’s DTC channel witnessed growth of 11% to reach $655 million. In 2020, the company witnessed 40% growth in e-commerce sales, which contributed 47% to total direct-to-consumer revenues. Under Armour continues to focus on boosting DTC business through store expansion initiatives and enhancement of its e-commerce platform. Moreover, the company plans to continue pulling back on promotions and discounts to drive premium brand positioning within the DTC channel.

Other Strategic Endeavors

Under Armour is progressing well with its multi-year transformation plan. Its long-term growth strategy is focused on improving sales through product innovation, investments in owned stores and digitization to directly reach customers, and selling more inventory at full price. Additionally, the company is focused on strengthening its brand through enhanced customer connections and strict go-to-market process.  

Also, the company’s international business has been doing well. Revenues from the international unit increased 7% (or up 4.1% on a currency-neutral basis) to $448 million during the final quarter of 2020. Within international business, net revenues from Asia-Pacific and Latin America rose 26.1% and 2.2%, respectively. The company continues to seek opportunities for expanding its global footprint.

Wrapping Up

We believe that brand strength, solid market presence and efficient e-commerce business should continue to contribute to the company’s performance. In fact, the company’s optimistic top line view echoes similar sentiments. Management anticipates full-year 2021 revenues to increase at a high-single-digit percentage rate. This reflects a high single-digit growth rate in North America and a high-teens growth rate in the international business. For first-quarter 2021, the company envisions revenues to increase approximately 20%. Moreover, management believes that aforementioned initiatives coupled with cost-containment efforts should help the company return to double-digit operating margin over the time.

Check These Key Picks

G-III Apparel Group, Ltd. (GIII - Free Report) , flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 11.6%. You can see the complete list of today’s Zacks #1 Rank  stocks here.

Crocs, Inc. (CROX - Free Report) has a long-term earnings growth rate of 15%. It presently sports a Zacks Rank #1.

Abercrombie & Fitch Company (ANF - Free Report) , also with a Zacks Rank #1, has a long-term earnings growth rate of 18%.

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