Under Armour Case Analysis Essay
UnderArmour Case Review
UnderArmour
The company I selected is one of the most up and coming and edgy athletic equipment and apparel firms in the world. It is UnderArmour, and it is fastly climbing the ranks of athletic gear concerning such competitors as Nike and Adidas. UnderArmour has been able to distance themselves with a new, fresh image but at the same time they are still producing equipment that rivals the biggest competitors of the business. Not only has Under Armour seen success in their industry, but their success Financially has been completely overlooked and underrated. Their value added has ben unbelievable for their shareholders and in the public eye the company has been a fast rising competitor. According to the Under Armour SEC filing February 28 of this year, “ Our net revenues have grown to $606.6 million in 2007 from $115.4 million in 2003. We believe that our growth in net revenues has been driven by a growing …show more content…
interest in performance products and the strength of the Under Armour brand in the marketplace relative to our competitors, as evidenced by the increases in sales of our men's, women's and youth apparel products, footwear and accessories...Our license revenues have grown to $24.0 million in 2007 from $1.7 million in 2003. We have entered into licensing agreements with established, high-quality manufacturers to produce and distribute Under Armour branded products to further reinforce our brand identity and increase our net revenues and gross profit. In exchange for the use of our trademarks, our licensees pay us license revenues based on their net sales of core products of socks, hats, bags, watches, eyewear, and other accessories. We seek to continue to grow our license revenues by working with our existing licensees to offer additional products and increase their distribution, and by selectively entering into new licensing agreements,” (UA SEC Filing). There is no secret to the fact that Under Armour has been very profitable over the last 5 years, but exactly how profitable remains to be seen. To find out if they are adding value for their stock holders, we must calculate many numbers. These numbers signify many calculations and are understood in the Business world as important numbers. The net revenues over the past three years for Under Armour have skyrocketed exponentially during that time. There has been an uprising in those that have allowed for very high NOPAT numbers.
The NOPAT number for 2005 was $267,798 which was dwarfed by the number from 2006 which was $410,581 and this number was subsequently passed over by the number from the year 2007 which was $570,076 (Numbers in Thousands). These numbers will be the catalyst for us to be able to understand what the economic profit for Under Armour is and why it is important. That being shown, the economic profit of this company is staggering. This is amazing considering that Under Armour does most all of its business domestically, not internationally, like most of their major competitors. The economic profit in 2007 seven was:
$268,559. This number is a combination of the success of their product and the freshness of their approach and the way the market the Under Armour name. There are many possible reasons for their success. “We plan to continue to increase our net revenues by building upon our relationships with existing customers, expanding our product offerings in new and existing retail stores, offering new products and building our brand internationally. In recent years, we expanded our product offerings to include cleated footwear and additional men's and women's performance products as well as additional products for off-field outdoor sports, including hunting, fishing, running, mountain sports, skiing and golf. New product offerings in 2008 will include non-cleated footwear, with the introduction of performance training footwear in May 2008. As we have expanded into new product lines, sales of our existing product lines have continued to grow,” (UA SEC Filing). As you can well see, the importance of expanding the Under Armour line internationally is one of their biggest goals and also they want to expand their product line to include more athletic gear that goes above and beyond their apparel. Perhaps the biggest reason for their success is the simple, yet catchy motto tagged to all their marketing: “You must protect this house!” Under Armour’s marketing has long been the envy of many of it’s competitors because they do such a great job appealing to the widest range of demographics. Starting with just a moisture wicking t-shirt, Under Armour has expanded over the last five years. All while the motto has stayed the same and their target market has grown. This technique of using the motto has led to public popularity and also popularity in the business world. “It wasn't until August 2002 that the company unveiled its first television commercial. Its subsequent campaign, featuring the "We Must Protect This House," tagline, was widely acclaimed and earned the company an ADDY Award given by the American Advertising Federation,” (Rovell ESPN). Two years ago, Under Armour went public and offered up to $100 million dollars of stock that would ultimately be stocked up on being that UnderArmour became a major player in the equipment industry. "Under Armour is no longer an up-and-coming brand," said Ben Sturner, president of Leverage Sports Agency, a New York-based sports marketing firm. "They have positioned themselves as a real player in the industry and in the eyes of consumers in only a few years' time," (Rovell ESPN). It is clear, even with insiders in the industry that this brand will not only now be a player, but continue to grow. Based on the numbers as stated earlier, it is hard to tell if Under Armour can grow even more, but they show no signs of stopping now. Long before UA was a product to be reckon with, it was a simple, understated idea.
Kevin Plank was a college football player who didn’t like that his cotton shirt absorbed water. So he developed a shirt that wicked water away from the skin making athletes feel and perform better. “The high tech fabric that he chose had qualities that could wick sweat and other moisture through the fabric to the surface instead of absorbing it. He believed that if athletes could be dry and the moisture wicking ability could help regulate temperature they would perform better. That was his concept. He started the company using $20,000 of his own money, $40,000 from credit and a $250,000 Small Business Loan,” (Lyster). It seems that this undertaking was a huge risk, and Plank, who started the business out of his grandmother’s basement, was the only person with the gall to start a sports apparel company in the face certain demise facing such giants as Nike, Adidas and Reebok. It was this underdog idea that became the basis for the Plank and his
idea. When the company was in it’s infancy, there was little money for proper advertising. Plank, a former college football player, used his resources to acquire basically free advertising from NFL players through a network of help. “In the early going, Under Armour did very little advertising. Most of the buzz came from word of mouth and from fans who saw the logo on the clothes of America's most famous athletes. The company eventually signed endorsers, who now include NFL players LaVar Arrington, Jonathan Vilma and Eric Ogbogu, Texas Rangers second baseman Alfonso Soriano, women's soccer star Heather Mitts and tennis player Robby Ginepri,” (Rovell ESPN). As the company started gaining credibility amongst professional and college athletes, the stone started to roll. One of the biggest reasons for the success currently of Under Armour is their mass amount of licensing agreements. Essentially, even one licensing can procure success for a company, no matter how small or big the league or team is , as long as there is some sort of exposure. Essentially there is no major difference between a commercial, or the fact that pro athletes were using Under Armour, it is just basically a live commercial. This started to lead to full size agreements between Plank and many leagues on apparel. “The company also sells its product to teams in Major League Baseball, Major League Soccer and the National Hockey League, and has been the undergarment of choice to at least 700 Division I men's and women's college teams. The company's only official college relationship is with the University of Maryland football team. The company is now the third largest branded sports apparel company in the United States. It currently owns 7.5 percent of the market and is behind only Nike and adidas, according to Neil Schwartz of SportsScanINFO, a retail tracking firm,” (Rovell ESPN). This is just a sampling of how this company has gained such great profit, because when they started they weren’t about getting pro attention but college attention, which is where the real heart of the consumer in that industry is. This is a more comprehensive detailing of who Under Armour works with: “In 1998 Under Armour became the official supplier of performance apparel to the National Football League Europe and in 1999 Warner Bros. signed on as a client as well. Under Armour apparel supplied clothing for the movie “Any Given Sunday” and “The Replacements”. It was becoming apparent that Under Armour was no longer just associated with sports but all forms of activity. 2000 was the year that Under Armour became a permanent fixture worldwide. They had 8000 official retail locations all over the world and they were continuing to grow to impressive new heights including:
* Major league lacrosse
* Major league Soccer
* National Hockey League
* USA Baseball
* US Ski Team
Between 2000 and 2005 Under Armour was supplying over 100 division 1A football programs and thirty NFL football teams. Each year they were featured in the superbowl in one form or another. Numerous articles and case studies were written with the best being Time magazines feature that titled Under Armour as the one of the fastest growing private companies. Plank was also named businessperson of the year by the Baltimore Business Journal in 1993,” (Lyster). It is clear that Under Armour is a leader in the athletic gear industry, but it is the strides that they are making business wise that will propel them to the top of the business world. As of now, Under Armour has offices all over the world in such places as London, Hong Kong, Toronto and Denver. It is headquartered in Baltimore, Maryland. Over the last year Under Armour has made strides to reach more and more of the market. “They have introduced the UA Tech line, a more technical savvy and advanced version of their original line Loosegear. To reach further into the marketplace they are now targeting individual sports starting with running. They are introducing UA Streaker a line developed with technical advancements for runners. The performance apparel industry is now a multi billion dollar business. This industry is consistently entering new markets including everyday wear and even business suit apparel. It is incorporating the performance materials to make the everyday more comfortable,” (Lyster). These are just a few of the major improvements they have made to their line, and to be sure they aren’t the last. Not if they keep on the pace that they have currently maintained. Under Armour is an unbelievable company with unbelievable success. “With 546 Under Armour employees and top competitors like Nike and Adidas, he has approximately 75% of the market share; they are definitely on the right track,” (Lyster). Along with this, UA is know a publicly traded company that is in the public eye more now than almost any other company, something that seemed like a distant chance only a few years ago. But with this company the sky is they limit, their underdog style will be sure to provide huge profits for years to come. Because they are committed to “protecting their house.”
Reference
Lyster, Stephanie. "The History of Under Armour - a Mastermind for Performance Apparel." EZine Articles. Under Armour. 28 Feb. 2008 <http://ezinearticles.com/?The-History-of-Under-Armour---A-Mastermind-for-Performance-Apparel&id=127493>. Rovell, Darren. "Under Armour Could Offer Up $100 Million in Stock." ESPN. 26 Aug. 2005. Under Armour. 27 Feb. 2008 <http://sports.espn.go.com/espn/columns/story?columnist=rovell_darren&id=2143609>. United States. Securities and Exchange Commission. Form 10-K for Under Armour, Inc. 22 Feb. 2008. 24 Feb. 2008 <http://biz.yahoo.com/e/080222/ua10-k.html>.
UnderArmour
The company I selected is one of the most up and coming and edgy athletic equipment and apparel firms in the world. It is UnderArmour, and it is fastly climbing the ranks of athletic gear concerning such competitors as Nike and Adidas. UnderArmour has been able to distance themselves with a new, fresh image but at the same time they are still producing equipment that rivals the biggest competitors of the business. Not only has Under Armour seen success in their industry, but their success Financially has been completely overlooked and underrated. Their value added has ben unbelievable for their shareholders and in the public eye the company has been a fast rising competitor. According to the Under Armour SEC filing February 28 of this year, “ Our net revenues have grown to $606.6 million in 2007 from $115.4 million in 2003. We believe that our growth in net revenues has been driven by a growing …show more content…
interest in performance products and the strength of the Under Armour brand in the marketplace relative to our competitors, as evidenced by the increases in sales of our men's, women's and youth apparel products, footwear and accessories...Our license revenues have grown to $24.0 million in 2007 from $1.7 million in 2003. We have entered into licensing agreements with established, high-quality manufacturers to produce and distribute Under Armour branded products to further reinforce our brand identity and increase our net revenues and gross profit. In exchange for the use of our trademarks, our licensees pay us license revenues based on their net sales of core products of socks, hats, bags, watches, eyewear, and other accessories. We seek to continue to grow our license revenues by working with our existing licensees to offer additional products and increase their distribution, and by selectively entering into new licensing agreements,” (UA SEC Filing). There is no secret to the fact that Under Armour has been very profitable over the last 5 years, but exactly how profitable remains to be seen. To find out if they are adding value for their stock holders, we must calculate many numbers. These numbers signify many calculations and are understood in the Business world as important numbers. The net revenues over the past three years for Under Armour have skyrocketed exponentially during that time. There has been an uprising in those that have allowed for very high NOPAT numbers.
The NOPAT number for 2005 was $267,798 which was dwarfed by the number from 2006 which was $410,581 and this number was subsequently passed over by the number from the year 2007 which was $570,076 (Numbers in Thousands). These numbers will be the catalyst for us to be able to understand what the economic profit for Under Armour is and why it is important. That being shown, the economic profit of this company is staggering. This is amazing considering that Under Armour does most all of its business domestically, not internationally, like most of their major competitors. The economic profit in 2007 seven was:
$268,559. This number is a combination of the success of their product and the freshness of their approach and the way the market the Under Armour name. There are many possible reasons for their success. “We plan to continue to increase our net revenues by building upon our relationships with existing customers, expanding our product offerings in new and existing retail stores, offering new products and building our brand internationally. In recent years, we expanded our product offerings to include cleated footwear and additional men's and women's performance products as well as additional products for off-field outdoor sports, including hunting, fishing, running, mountain sports, skiing and golf. New product offerings in 2008 will include non-cleated footwear, with the introduction of performance training footwear in May 2008. As we have expanded into new product lines, sales of our existing product lines have continued to grow,” (UA SEC Filing). As you can well see, the importance of expanding the Under Armour line internationally is one of their biggest goals and also they want to expand their product line to include more athletic gear that goes above and beyond their apparel. Perhaps the biggest reason for their success is the simple, yet catchy motto tagged to all their marketing: “You must protect this house!” Under Armour’s marketing has long been the envy of many of it’s competitors because they do such a great job appealing to the widest range of demographics. Starting with just a moisture wicking t-shirt, Under Armour has expanded over the last five years. All while the motto has stayed the same and their target market has grown. This technique of using the motto has led to public popularity and also popularity in the business world. “It wasn't until August 2002 that the company unveiled its first television commercial. Its subsequent campaign, featuring the "We Must Protect This House," tagline, was widely acclaimed and earned the company an ADDY Award given by the American Advertising Federation,” (Rovell ESPN). Two years ago, Under Armour went public and offered up to $100 million dollars of stock that would ultimately be stocked up on being that UnderArmour became a major player in the equipment industry. "Under Armour is no longer an up-and-coming brand," said Ben Sturner, president of Leverage Sports Agency, a New York-based sports marketing firm. "They have positioned themselves as a real player in the industry and in the eyes of consumers in only a few years' time," (Rovell ESPN). It is clear, even with insiders in the industry that this brand will not only now be a player, but continue to grow. Based on the numbers as stated earlier, it is hard to tell if Under Armour can grow even more, but they show no signs of stopping now. Long before UA was a product to be reckon with, it was a simple, understated idea.
Kevin Plank was a college football player who didn’t like that his cotton shirt absorbed water. So he developed a shirt that wicked water away from the skin making athletes feel and perform better. “The high tech fabric that he chose had qualities that could wick sweat and other moisture through the fabric to the surface instead of absorbing it. He believed that if athletes could be dry and the moisture wicking ability could help regulate temperature they would perform better. That was his concept. He started the company using $20,000 of his own money, $40,000 from credit and a $250,000 Small Business Loan,” (Lyster). It seems that this undertaking was a huge risk, and Plank, who started the business out of his grandmother’s basement, was the only person with the gall to start a sports apparel company in the face certain demise facing such giants as Nike, Adidas and Reebok. It was this underdog idea that became the basis for the Plank and his
idea. When the company was in it’s infancy, there was little money for proper advertising. Plank, a former college football player, used his resources to acquire basically free advertising from NFL players through a network of help. “In the early going, Under Armour did very little advertising. Most of the buzz came from word of mouth and from fans who saw the logo on the clothes of America's most famous athletes. The company eventually signed endorsers, who now include NFL players LaVar Arrington, Jonathan Vilma and Eric Ogbogu, Texas Rangers second baseman Alfonso Soriano, women's soccer star Heather Mitts and tennis player Robby Ginepri,” (Rovell ESPN). As the company started gaining credibility amongst professional and college athletes, the stone started to roll. One of the biggest reasons for the success currently of Under Armour is their mass amount of licensing agreements. Essentially, even one licensing can procure success for a company, no matter how small or big the league or team is , as long as there is some sort of exposure. Essentially there is no major difference between a commercial, or the fact that pro athletes were using Under Armour, it is just basically a live commercial. This started to lead to full size agreements between Plank and many leagues on apparel. “The company also sells its product to teams in Major League Baseball, Major League Soccer and the National Hockey League, and has been the undergarment of choice to at least 700 Division I men's and women's college teams. The company's only official college relationship is with the University of Maryland football team. The company is now the third largest branded sports apparel company in the United States. It currently owns 7.5 percent of the market and is behind only Nike and adidas, according to Neil Schwartz of SportsScanINFO, a retail tracking firm,” (Rovell ESPN). This is just a sampling of how this company has gained such great profit, because when they started they weren’t about getting pro attention but college attention, which is where the real heart of the consumer in that industry is. This is a more comprehensive detailing of who Under Armour works with: “In 1998 Under Armour became the official supplier of performance apparel to the National Football League Europe and in 1999 Warner Bros. signed on as a client as well. Under Armour apparel supplied clothing for the movie “Any Given Sunday” and “The Replacements”. It was becoming apparent that Under Armour was no longer just associated with sports but all forms of activity. 2000 was the year that Under Armour became a permanent fixture worldwide. They had 8000 official retail locations all over the world and they were continuing to grow to impressive new heights including:
* Major league lacrosse
* Major league Soccer
* National Hockey League
* USA Baseball
* US Ski Team
Between 2000 and 2005 Under Armour was supplying over 100 division 1A football programs and thirty NFL football teams. Each year they were featured in the superbowl in one form or another. Numerous articles and case studies were written with the best being Time magazines feature that titled Under Armour as the one of the fastest growing private companies. Plank was also named businessperson of the year by the Baltimore Business Journal in 1993,” (Lyster). It is clear that Under Armour is a leader in the athletic gear industry, but it is the strides that they are making business wise that will propel them to the top of the business world. As of now, Under Armour has offices all over the world in such places as London, Hong Kong, Toronto and Denver. It is headquartered in Baltimore, Maryland. Over the last year Under Armour has made strides to reach more and more of the market. “They have introduced the UA Tech line, a more technical savvy and advanced version of their original line Loosegear. To reach further into the marketplace they are now targeting individual sports starting with running. They are introducing UA Streaker a line developed with technical advancements for runners. The performance apparel industry is now a multi billion dollar business. This industry is consistently entering new markets including everyday wear and even business suit apparel. It is incorporating the performance materials to make the everyday more comfortable,” (Lyster). These are just a few of the major improvements they have made to their line, and to be sure they aren’t the last. Not if they keep on the pace that they have currently maintained. Under Armour is an unbelievable company with unbelievable success. “With 546 Under Armour employees and top competitors like Nike and Adidas, he has approximately 75% of the market share; they are definitely on the right track,” (Lyster). Along with this, UA is know a publicly traded company that is in the public eye more now than almost any other company, something that seemed like a distant chance only a few years ago. But with this company the sky is they limit, their underdog style will be sure to provide huge profits for years to come. Because they are committed to “protecting their house.”
Reference
Lyster, Stephanie. "The History of Under Armour - a Mastermind for Performance Apparel." EZine Articles. Under Armour. 28 Feb. 2008 <http://ezinearticles.com/?The-History-of-Under-Armour---A-Mastermind-for-Performance-Apparel&id=127493>. Rovell, Darren. "Under Armour Could Offer Up $100 Million in Stock." ESPN. 26 Aug. 2005. Under Armour. 27 Feb. 2008 <http://sports.espn.go.com/espn/columns/story?columnist=rovell_darren&id=2143609>. United States. Securities and Exchange Commission. Form 10-K for Under Armour, Inc. 22 Feb. 2008. 24 Feb. 2008 <http://biz.yahoo.com/e/080222/ua10-k.html>.