Under Armour SWOT 2024 | SWOT Analysis of Under Armour

Company: Under Armour
CEO: Patrik Frisk
Year founded: 1996
Headquarter: Maryland, USA
Number of Employees (March 2020): 16,400
Public or Private: Public
Ticker Symbol: UAA
Market Cap (October 2020): $5 Billion
Annual Revenue (2020) : $5.3 Billion
Profit |Net income (2020): $ 92.14 Million

Products & Services: Running shoes | Golf shoes | Training shoes | Hoodies | Backpacks and bags | Golf shirts Football gear | Hiking boots | Basketball shoes | Polo shirts | Gym Bags | Sports bra | Gym and training tops | Running shorts | Short sleeve shirts | Caps | Football boots | Sleepwear
Competitors: Nike | Adidas | Reebok | New Balance | Converse | Puma | Bata | Umbro | Woodland | Liberty Shoes | Fila

Fun Fact:

Did you know that the CEO Kevin Plank started the business in his grandmother’s basement?

An Overview of Under Armour

Under Armour was founded in 1996 by Kevin Plank who still serves as the CEO of the company. Under Armour is an American originated company producing both casual and sports apparels along with footwear and accessories. It has outlets in Europe, the Middle East, Africa, North America, Asia Pacific, and South America. In 2019, Kevin Plank stepped as CEO and was replaced by Patrik Frisk in January 2020. [1]

In 2017, its revenue contributions from North America alone were estimated to be about 76.5% and 8.7% in the Asia Pacific. The company has remained unbeatable in its pursuit to provide the finest quality T-Shirts that offer athletes lighter, dryer and more comfortable clothing. In FY2019, North America’s revenue contribution dropped to 69%, and revenue from Asia-Pacific increased to 12%.  [2]

The products are designed to adapt to the weather conditions. Its international reach and evolutionary transformation have made Under Armor the largest digital fitness and Health Company worldwide.

As of 2018, the company has 15,000 employees. The number of employees increased to 16,400 in 2020.

SWOT Analysis of Under Armour

The following is a detailed Under Armour SWOT analysis.

Under Armour Strengths

1. Portfolio – Under Armour’s broad product portfolio has strengthened its standing. The company is not dependent on one specific product. Its establishment has not limited itself to only footwear but has also incorporated apparel, accessories, etc. The extensive product line eliminates the risk of failure. It also ensures a high sale ratio and continuous growth of the company. The revenue from 2016-2017 for apparel was 67%, while for footwear it was 21%. In FY2019, total net revenue was $5.3 billion, with $3.47 billion from apparel, $1.086 billion from footwear, and around $400 million from accessories. [3]

2. Distribution Networks – Under Armour has amazed investors with its accelerated growth in the market. It was made possible due to its creative strategy of operating through multiple distribution networks. 65% of its revenue was accumulated through wholesale distribution, whereas 31% was gathered through direct consumer sales. The company currently sells its products in some countries through licensing. These operational modifications have continued to expand the brand globally.

3. Adoption of Digital Apps – Under Armour has adapted digital transformation with apps like MapMyFitness, MyFitnessPal (calorie and nutrition app), and Endomondo (fitness app maker). This has enhanced its revenue potential, allowing it to diversify its resources and continue its transformational industrial potential.

4. Brand Recognition – Under Armour has been voted as being the world’s 5^th most valuable business brand in the year 2017. It’s brand recognition has allowed it to develop authenticity and trustworthiness much like Nike. This erases any doubts for its investors who are now investing in the company aggressively.

5. Adoption of E-Commerce – Under Armour recently announced it would accelerate the digitization of its sales channels. Its transformation efforts will start with the launch of a new e-commerce site in North America in the summer of 2020. This follows a successful trial of a smaller version of the site in the EMEA region. [4]

Under Armour Weaknesses

1. Limited Operating Presence – The company is still relatively new with a limited operating presence in the international markets. 83% of its revenue is gathered from its North American branches which makes it entirely dependent on the American markets. It has yet to expand and generate the same revenue in the International markets. This is necessary to sustain the company’s growth. In Q1 of 2020, North America accounted for roughly 65% of total sales. Revenue from the region fell 28% to $609 million compared to a 12% drop in its international sales. Overdependence on North America exposed Under Armour to the effects of market uncertainties leading to a decline in net revenue from $1.20 billion to $930.2 million in Q1 2020, which represents a 23% drop. [5]

2. High Investment Expenditure – Under Armour has taken a risk with its high investment expenditure in the past three years. In the last two years, it spent about $847, 477,000 and $153, 312,000 respectively. Its restructuring plan for 2017 has added to the spending with more expenses to follow. This investment is positive if it generates more revenues. However, it does limit its ability for new acquisitions and generating more revenue is still questionable.

3. Slow E-Commerce Adoption – Compared to competitors, Under Armour’s e-commerce adoption has been very slow. Most of its core customers are now accustomed to in-store purchases and slow payments, which has it difficult to shift to e-commerce. Its recent e-commerce effort failed to take because customers don’t want to pay full price. [6]

4. Poor Expansion Strategies – Under Armour focused on direct-to-consumer sales as its long-term growth opportunity instead of online sales, which was misguided. The company invested in new stores, including a new flagship store in New York but later pulled out of the deal. The events of 2020 highlighted the ineffectiveness of this strategy. It contributed to a decline in sales by 23% and 40% in Q1 and Q2 of 2020, respectively. [7]

Under Armour Opportunities

1. Introduce New Products – Under Armour prides itself in its innovative The products it has conceived since its inception have been technologically advanced. This gives it the leverage to continue the trend of offering better products with necessary modifications. An extension in its product line will attract more consumers and prove beneficial for the company in the long run. Under Armour’s latest innovative products include its women’s HOVR Breakthru basketball shoe and M+MI line, which were both released in September 2020. [8]

2. Collaboration – Under Armour collaboration with stores such as Kohl’s began in 2017 when Kohl’s started selling its merchandise. The cooperation proved to be a success according to Kohl’s CEO, Kevin Marshall. While many well-established department stores like Dillard’s and Macy’s sell Under Armour products, there are retailers like J. C. Penney that do not showcase the brand. Under Armour should consider more collaborations and partnerships to enter more markets in the future and grow its revenue accordingly.

3. International Markets – International markets have much scope for Under Armour to generate more sales and get new customers. The company’s sales grew by 57% in the second quarter of 2017. This figure guarantees a promising future. In FY2019, North America contributed 69% of its revenue and 12% from EMEA and Asia-Pacific, with Latin America contributing only 4%. Asia-Pacific region saw the greatest growth, with net revenues increasing by almost $80 million. [9]

4. Focus on Women’s Apparel – Despite the uncertainties in 2020, sales of UA women’s activewear apparel increased by 77% from January to May 2020 in the United States compared to the same period in 2019. By the end of Q1 in 2020, online sales of women’s apparel rose 214% and a 46% increase for girls’ items. These increases highlight the huge potential of focusing on women’s apparel. [10]

Under Armour Threats

1. Political Polarization – The company was involved in a recent controversy because of the Trump administration. CEO Kevin Plank initially supported President Trump only to withdraw when his actions resulted in public This controversy has not subsided for the company and has threatened its working ability in the face of political polarization.

2. Increased Competition – Its major competitors Nike and Adidas have higher brand recognition and better operational experiences overseas. This has helped them to gain a stronger customer base that could threaten Under Armour’s working ability in the future.

3. Product Capabilities – Under Armour’s chin straps and athletic cups have been criticized by experts to cause potential athletic injuries. Any form of inflicted injury by these products could damage the brand’s reputation and drive away endorsements.

4. Market Uncertainties – The recent events have devastated Under Armour’s revenues. In the quarter ended June 30, its net revenue dropped by 41% to $707.6 million, wholesale business revenue dropped by 58%, and direct-to-consumer sales fell only 13%. If uncertainties persist, Under Armour loses even more. [11]

5. Federal Investigations – The founder and former CEO of Under Armour, Kevin Plank, along with CFO David Bergman, are under investigation for violating federal securities laws. The case forced the founder to step down. Ongoing investigations and the final rulings can affect Under Armour’s operations and threaten its financial well-being. [12]

Conclusion

Under Armour SWOT analysis shows a promising future for the brand. All it requires is some necessary restructuring by cutting expenditure. The company has made enough investments thanks to media coverage and publicity.

It’s already booming revenue, and expansive growth makes it an ideal candidate for investments. Moreover, the brand is already recognized worldwide. Under Armour has a strong foothold in the American markets, all it needs to do is to capture the international markets.

 References & more information

1. Felsted, A. (2020, February 11). Under Armour’s New CEO Makes an Ugly Start. Bloomberg
2. Statista Research Team (2020, Mar 2). Under Armour’s net sales share worldwide in 2019. Statista
3. Statista Team (2020, Mar 5). Under Armour’s net sales worldwide in 2019. Statista
4. Johnston, L. (2020, Feb 13). Under Armour Hoping its New E-Commerce Platform Will Accelerate its Turnaround. Consumer Goods Technology
5. Thomas, L. (2020, May 11). Under Armour, sales plummet 23% as coronavirus stalls turnaround plans. CNBC
6. Barkho, G. (2020, Feb 12). With sluggish DTC growth, Under Armour lowers 2020 expectations. Modern Retail
7. Roberts, D. (2020, September 2). 3 signs that Under Armour is shrinking to grow. Yahoo Finance News
8. Verry, P. (2020, Sep 15). Under Armour Has a New Basketball Shoe Coming. Footwear News
9. SR Team (2020, Mar 2). Under Armour’s net sales share worldwide in 2019. Statista
10. LoRé, M. (2020, Sep 15). Under Armour’s Focus On Women Is Paying Dividends In Innovation And Sales. Forbes
11. Balu, V. (2020, July 31). Under Armour warns of margin pressure for the rest of 2020. Reuters
12. Clough, R. (2020, July 27).  Under Armour falls after the founder, CFO, is named in the SEC probe. The Detroit News

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