In the money: Under Armour looks to improve style credentials
In recent years performance apparel and footwear maker Under Amour has seen success through innovation, with high-tech sportswear lines like Cold Black and Charged Cotton driving growth by creating a new premium price point for its products.
This focus on innovation has helped the company to a 7% rise in second-quarter net income to reach US$7m, it said yesterday (24 July), with net revenue in the three months to 30 June jumping 27% to $369m. The firm also raised its full-year operating profit forecast.
Speaking on a call with analysts, founder, chairman, CEO and president Kevin Plank was keen to point out the performance of the company as a "whole is greater than the sum of its parts".
However, he did highlight some of the group's successes, saying the "momentum from the strong first quarter launch of our Armour Bra and Studio product continued in Q2, and we also saw great growth in women's running apparel".
He also said the company is growing "on the field and off", and to aid these efforts is focused on offering more "style" from its products.
"The consumer is looking for us to push and innovate a bit more, and our product team is highly focused on that as we continue to introduce more and more style as the consumer is looking to [wear our products] off the field, and I think [we need to] showcase the brand a little more," said Plank.
The firm also sees this as an opportunity to extend its already healthy margins, which fell slightly over the quarter to 45.9% from 46.3%, by allowing it to charge higher prices for its products. Plank said this shift enables it to offer its standard crew neck T-shirt at $25, and a V-neck version at $30.
Another shift is to broaden the end use of its apparel into categories like outdoor, while "continuing to drive an innovation agenda that addresses the highest performance needs of athletes".
Such a focus comes from taking a more strategic approach to product development, assortment and better use of wholesale distribution.
"We're now able to take initiatives like Charged Cotton and Storm Cotton and build platforms with hundreds of millions of dollars in revenues...where just a few years ago, that revenue channel did not exist for the brand."
Under Amour is also in the process of reducing the number of SKUs it offers, planning a 20% reduction by the end of this year compared with the beginning of 2011.
"We call it reducing noise in the supply chain, of just bringing productive SKUs in the supply chain versus non-productive SKUs. It just helps our focus around productivity. It also helps our focus around inventory management and creating less excess inventory," said Plank.
While innovation has driven much of the company's growth in recent years, the sportswear brand is still looking to grow within its existing categories.
"I don't think we have to take a lot of huge chances," said Plank.
"Based on the learnings that we've had over the last few years and based on some really low hanging fruit and whether it's Charged Cotton, Armour Bra, doubling down on women's and some of these other places, we can really stay within ourselves and we can continue to find meaningful growth. I think demonstrated in what we put up in Q2."
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