Under Armour Study

Jordan Fuller, Zach Greene, Courtney Starzer, Pallavi Somani, Lifeng Wang

Strategic Recommendation:Global Expansion

MAJOR STRATEGIC CHALLENGE : Global Expansion

RECOMMENDED SOLUTION: Enter European market through Foreign Direct

Investment (FDI) + retail and athletic partnerships

Under Armour Primarily Competes in the U.S. Athletic Apparel Industry

INDUSTRY FOCUS:• provide

sportswear for customer performance, comfort, and fashion needs

GROWTH FACTORS: • lifestyle changes• active seniors• activity needs• attire trends

Source: Freedonia Focus Reports: Athletic Apparel – United States

The Industry Consists of Many Companies with Similar Product Offerings

BRANDS Nike Adidas Columbia Puma LuluLemon Patagonia

ATHLETICAPPAREL

X X X X X X

ACCESSORIES X X X X X X

PERFORMANCE APPAREL

X X X - X X

Str

ateg

ic G

rou

ps

http://fortuneaskannie.files.wordpress.com/2011/10/under_armour_market_share1.jpg

The Industry is Highly Competitive and Relatively Unattractive to Enter

Threat of Substitutes

Bargaining pow

er of buyers

Barg

aini

ng

pow

er o

f su

pplie

rs

Intensity of RivalryThreat of New

Entrants

Medium-High

High

Low

MediumHIGH

Under Armour Resources and Capabilities

Valuable Rare Stable Inimitable

Brand

Management

Sponsorship

Technology

Engineers

Shelf Space

Stores

Licensee

The Continued Strength of the Firm Depends on Competitive Advantages

InnovativeFirst Mover

High QualityProducts

Marketing Strength

Current Competitive Position: STRONGHowever… intense competition makes the company vulnerable

Solid Relationships with Retailers

Under Armour is Facing Three Major Challenges

Corporate Challenges

Footwear Line Development

1) Market Dominance by Nike

2)Negative Initial Reviews

International Expansion

1) Low Brand Awareness abroad

2) Lack of managerial capacity

3) Uncertain of customer preferences

Increase Direct Retail Presence

1) Capital Intensive2) Labor Intensive

International Expansion is the Most Important Challenge to Address

Fast growing market

segment

Variety of popular sports in Europe

Sponsorship deals with soccer and rugby clubs

Nike losing apparel

market share in Western

Europe

Pros Cons

Foreign Direct Investment(FDI)

Elevate brand image Lack of local knowledge

Partnership Local knowledge supply Dependence on counter party

Licensing Prior success experience

Limited expansion potential

Three International Expansion Strategies Comparison Chart

MadridBarcelonaLondonTottenhamHannoverFrankfurtRomeLisbon

The Key to SuccessAthletic and Retail Partnerships

2013 Europe

Sponsorship

Flagship Stores

2015 Rugby World Cup

Product Modification

2014 Asia & Brazil

World Cup Campaign

Product Innovation

2016 Emerging Markets

Utilize Previous International Experiences

Our Game Plan Across the World

Brand Image:Superior

Performance Wear

Product Line:

New Innovations

for New Markets

Financials:

$886 Million Revenue

$58 Million Net Income

Projected Tangible and Intangible Results

Appendix Begins

So does a new chapter of Under Amour Inc. International

Raw data(In thousands, except per share amounts) 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

Statements of Income data:

Net revenues 1,472,684 1,063,927 856,411 725,244 606,561 430,689 281,053 205,181 115,419 49,550 19,732

Cost of goods sold 759,848 533,420 446,286 370,296 301,517 215,089 145,203 109,748 64,757 26,329 9,348

Gross profit 712,836 530,507 410,125 354,948 305,044 215,600 135,850 95,433 50,662 23,221 10,384

Selling, general and administrative expenses 550,069 418,152 324,852 278,023 218,779 158,682 100,040 70,280 40,709 18,908 7,035

Income from operations 162,767 112,355 85,273 76,925 86,265 56,918 35,810 25,153 9,953 4,313 3,349

Interest & other expense, net -3,841 -2,258 -2,344 -850 749 1,457 -2,915 -1,283 -2,214 -894 -305

-2,064 -1,178 -511 -6,175 2,029 712 -79 -226

Income before income taxes 156,862 108,919 82,418 69,900 89,043 59,087 32,974 24,096 7,739 3,419 3,044

Provision for income taxes(1) 59,943 40,442 35,633 31,671 36,485 20,108 13,255 7,774 1,991 653 36

Net income 96,919 68,477 46,785 38,229 52,558 38,979 19,719 16,322 5,748 2,766 3,008

Growth ratesNet revenues 38.42% 24.23% 18.09% 19.57% 40.84% 53.24% 36.98% 77.77% 132.93% 151.11%Cost of goods sold 42.45% 19.52% 20.52% 22.81% 40.18% 48.13% 32.31% 69.48% 145.95% 181.65%

Gross profit 34.37% 29.35% 15.55% 16.36% 41.49% 58.70% 42.35% 88.37% 118.17% 123.62%Selling, general and administrative expenses 31.55% 28.72% 16.84% 27.08% 37.87% 58.62% 42.34% 72.64% 115.30% 168.77%

Income from operations 44.87% 31.76% 10.85% -10.83% 51.56% 58.94% 42.37% 152.72% 130.77% 28.78%Interest & other expense, net

Income before income taxes 44.02% 32.15% 17.91% -21.50% 50.70% 79.19% 36.84% 211.36% 126.35% 12.32%Provision for income taxes(1) 48.22% 13.50% 12.51% -13.19% 81.45% 51.70% 70.50% 290.46% 204.90% 1713.89%

Net income 41.54% 46.37% 22.38% -27.26% 34.84% 97.67% 20.81% 183.96% 107.81% -8.05%

Percentage of revenueNet revenues 1 1 1 1 1 1 1 1 1 1 1

Cost of goods sold

0.51596133

0.50136898

0.52111194

0.510581

0.49709263

0.49940676

0.51663921

0.53488383

0.56106014

0.53136226

0.47374823

Gross profit

0.48403867

0.49863102

0.47888806

0.489419

0.50290737

0.50059324

0.48336079

0.46511617

0.43893986

0.46863774

0.52625177

Selling, general and administrative expenses

0.37351462

0.39302697

0.37931787

0.383351

0.36068755

0.36843755 0.3559471

0.34252684

0.35270623

0.38159435

0.35652747

Income from operations

0.11052405

0.10560405

0.09957018

0.106068

0.14221983

0.13215569

0.12741369

0.12258932

0.08623364

0.08704339

0.16972431

Interest & other expense, net

-0.0026082

-0.0021223 -0.002737 -0.00117

0.00123483

0.00338295

-0.0103717 -0.006253

-0.0191823

-0.0180424

-0.0154571

-0.0014015 -0.0011072

-0.0005967

-0.00851

0.00334509

0.00165317 -0.0002811 -0.0011015 0 0 0

Income before income taxes

0.10651436

0.10237451 0.0962365

0.096381

0.14679974 0.1371918

0.11732307

0.11743777

0.06705135

0.06900101

0.15426718

Provision for income taxes(1)

0.04070323

0.03801201

0.04160736

0.043669

0.06015059

0.04668798

0.04716192 0.0378885

0.01725019

0.01317861

0.00182445

Net income

0.06581113 0.0643625

0.05462914

0.052712

0.08664916

0.09050382

0.07016114

0.07954928

0.04980116 0.0558224

0.15244273

APPENDIX – FINANCIAL PROJECTIONS (I)

APPENDIX – FINANCIAL PROJECTIONS (II)

(In thousands, except per share amounts) 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

Statements of Income data:

Net revenues 1,472,684 1,063,927 856,411 725,244 606,561 430,689 281,053 205,181 115,419 49,550 19,732


Gross profit 712,836 530,507 410,125 354,948 305,044 215,600 135,850 95,433 50,662 23,221 10,384Selling, general and administrative expenses 550,069 418,152 324,852 278,023 218,779 158,682 100,040 70,280 40,709 18,908 7,035


Interest & other expense, net -3,841 -2,258 -2,344 -850 749 1,457 -2,915 -1,283 -2,214 -894 -305

-2,064 -1,178 -511 -6,175 2,029 712 -79 -226



Net income 96,919 68,477 46,785 38,229 52,558 38,979 19,719 16,322 5,748 2,766 3,008

Europe Projection(In thousands, except per share amounts) 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012Statements of Income data:

Net revenues 885,709 639,872 515,067 436,180 364,801 259,027 169,032 123,401 69,416 29,801 11,867


Gross profit 428,718 319,060 246,660 213,475 183,461 129,667 81,704 57,396 30,469 13,966 6,245Selling, general and administrative expenses 330,825 251,487 195,374 167,210 131,579 95,435 60,167 42,268 24,483 11,372 4,231


Interest & other expense, net -2,310 -1,358 -1,410 -511 450 876 -1,753 -772 -1,332 -538 -183

-1,241 -708 -307 -3,714 1,220 428 -48 -136 0 0 0



Net income 58,290 41,184 28,138 22,992 31,610 23,443 11,860 9,816 3,457 1,664 1,809

APPENDIX – FINANCIAL PROJECTIONS (III)

International Expansion Strategies General Comparison

Risk Time Cost Financial Cost

Potential Profit

Control

Foreign Direct Investment(FDI)

High High High High High

Partnership Medium Medium Medium Medium Medium

Licensing Low Low Low Low Low

Works Cited Argersinger, Matt. "In Depth: Analyzing Under Armour." Motley Fool. N.p., 11

Dec. 2009. Web. 6 Dec. 2012. Betz, Brandy. "Hold On Under Armour Despite European Expansions." Motley Fool.

N.p., 05 Apr. 2012. Web. 6 Dec. 2012. <http://beta.fool.com/lynbetz/2012/04/05/hold-underarmour-despite-european-expansions/3396/>.

Brown, Abram. "Under Armour Sprints To Higher Sales And Profits, Lifts Full-Year Outlook." Forbes. Forbes Magazine, 24 July 2012. Web. 06 Dec. 2012. <http://www.forbes.com/sites/abrambrown/2012/07/24/und er-armour- sprints-to-higher-sales-and-profits-lifts-full-year- outlook/>.

Burke, Monte. "In An About-Face, Under Armour Will Introduce Cotton Apparel." Forbes. Forbes Magazine, 26 Jan. 2011. Web. 06 Dec. 2012.

<http://www.forbes.com/sites/monteburke/2011/01/26/in- an-about-face-under-armour-will-introduce-cotton- apparel/3/>.

Works Cited Cont. Burke, Monte. "Under Armour CEO Kevin Plank And His Underdog Horse Farm."

Forbes. Forbes Magazine, 07 Sept. 2012. Web. 06 Dec. 2012. Dreier, Fred. "Under Armour Flexing Its Muscles Overseas." Forbes. Forbes

Magazine, 04 Apr. 2012. Web. 06 Dec. 2012. <http://www.forbes.com/sites/freddreier/2012/04/04/under-armour-flexing- its-muscles-overseas/>.

"UABiz.com - Under Armour, Inc. - About Under Armour." UABiz.com - Under Armour, Inc. - About Under Armour. Under Armour, Inc., n.d. Web. 06 Dec. 2012. <http://investor.underarmour.com/company/about.cfm>.

Under Armour, Inc. Financial and Strategic Analysis Review. Rep. N.p.: n.p., n.d. Onesource. Web. 6 Dec. 2012.

<http://http://globalbb.onesource.com.proxy.lib.duke.edu/Web/Reports/ReportMainIndustry.aspx?SicCodeID=220505&Report=ALLMARKETRESEARCHREPORTS&Process=IP&Type=GetReport&FileFormat=PDF&ReportID=30114&FileName=FF90010.Pdf>.

Under Armour, Inc. Profile. Rep. N.p.: n.p., n.d. Hoover's Online. Web. 6 Dec. 2012. <http://subscriber.hoovers.com.proxy.lib.duke.edu/H/company360/companyPDFReport.pdf?companyId=106607000000000>.

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Under Armour Study