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Will Holding Under Armour (UAA) Stock Fetch You Great Returns?

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Under Armour, Inc. UAA has exhibited a decent run on the bourses so far this year. Thanks to its operational initiatives — strengthening of omni-channel solutions, expanding customer reach and focus on brand innovation — the stock has outperformed the Zacks Textile - Apparel industry. In the said period, shares of this Baltimore, MD-based company have surged about 23.5% compared with the industry’s rally of 13.7%.

Effective operational strategies, sturdy growth in direct-to-consumer channel and efforts to boost international footing are likely to play vital role in revenue generation for this Zacks Rank #3 (Hold) company. Markedly, the Zacks Consensus Estimate for the company’s current financial year sales and earnings suggests growth of 18.8% and 223.1%, respectively, from the year-ago period.

Here’s a Short Analysis

Under Armour is focused on strengthening its brand through enhanced customer connections, effective innovations and strict go-to-market process. The company strives to boost its operating model as well as return greater profitability and value to shareholders. Its long-term growth strategy involves improving sales through ongoing product innovation, investments in own stores and digitization to directly reach customers, and selling more inventory at full price. Management believes that aforementioned initiatives along with cost containment efforts should help the company to return to double-digit operating margin over time.

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The company continues to seek opportunities for increasing its global footprint and market share. Though Under Armour generates major portion of its revenues from the North America region, it intends to expand business operations to other parts of the world to mitigate the risks stemming from concentration in one geographic region. Revenues in the international unit increased 57.8% (or up 50.2% on a currency-neutral basis) to $452 million during the first quarter of 2021. Within the international unit, net revenues from Asia-Pacific and EMEA improved 119.7% and 40.6% to $210.2 million and $193.9 million, respectively.

In the past few years Under Armour has been trying to boost its direct-to-consumer business through store expansion initiatives and enhancement of its e-commerce platform. During the first quarter, direct-to-consumer revenues increased 54% to $437 million buoyed by a 69% jump in e-commerce sales as well as 44% growth across owned and operated retail stores. Moreover, the company’s e-commerce business represented approximately 45% of its total direct-to-consumer business.

Wrapping Up

Under Armour’s strong brand image and offerings, solid market presence as well as efficient e-commerce business should continue aiding the performance. The company has provided an optimistic view for fiscal 2021. Management anticipates full-year 2021 revenues to increase at a high-teen percentage rate, up from the prior projection of high-single-digit percentage rate increase. The raised top-line view reflects a high-teen percentage growth rate in North America and low-thirties percentage growth rate in the international business. In respect of second-quarter 2021, the company expects revenues to rise 70% year over year.

3 Stocks Looking Red Hot

Abercrombie & Fitch ANF has a long-term earnings growth rate of 18%. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn Holdings BOOT has a trailing four-quarter earnings surprise of 51.7%, on average. The stock carries a Zacks Rank #1.

Foot Locker, Inc. FL has a trailing four-quarter earnings surprise of 47.6%, on average. It currently carries a Zacks Rank #1.


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