Académique Documents
Professionnel Documents
Culture Documents
Class 18
Group Members: Francesco Barbuti, Niccol Colussi, Anastasia Concetti, Nicol Dubini, Laia Marin
Sola, Dimitar Panchev
May 3, 2016
Overview and
Performance Environment Sustainability Conclusions
Opportunity
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Overview and
Performance Environment Sustainability Conclusions
Opportunity
Opportunity
Currently products are primarily sold in Europe through wholesale distributors, online
stores and independent retailers
Products are now distributed to retail customers and e-commerce consumers in Europe
through a third-party logistics provider based out of Venlo (NL); this agreement
continues through April 2017
The opportunity we propose is the opening of Under Armour branded retail stores in
Europe, through a downstream vertical integration, creating a direct distribution channel
in the area
In particular, UA would strengthen its competitive position both by improving the
efficiency of its cost structure and by contributing to brand awareness
Potential increase in revenues as well as improvement in inventory turnover
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Overview and
Performance Environment Sustainability Conclusions
Opportunity
Stock Performance
Much smaller market cap than main Market Cap
industry competitors 120.00
98.62
Considerably higher stock price growth 100.00
(~ 400% total cumulative return over last 5 80.00
years) 60.00
The firm has never paid dividends and 40.00 26.97
plans to retain all earnings in the 20.00 9.71
foreseeable future for use in its business
0.00
Under Armour Adidas Nike
*Amounts in USD billions
Stock Price % Growth
700.00%
600.00%
500.00%
400.00% UA
Nike
300.00%
Adidas
200.00%
100.00%
0.00%
2011 2012 2013 2014 2015 2016 4
Overview and
Performance Environment Sustainability Conclusions
Opportunity
Financial Performance
In the last 5 years UA has performed quite well, exceeding industrys ROE and ROA
measures
It has revenues with strong 30% YoY growth on average for the last 5 years
On average, Under Armour has outperformed the industry in terms of both liquidity and
efficiency with slightly higher Acc. Receivables Turnover and Current Ratio
However UA has lower gross, operating and profit margins than the industry median:
o Much higher tax rate
o High marketing expenditures
o Possibly hasnt exploited economies of scales to such an extent yet
Revenue and Growth
4,500.0 45.0%
4,000.0 40.0% Industry
3,500.0 35.0%
Median 2015 2014 2013 2012 2011
Quick
3,000.0 30.0% Ratio 1.72 1.49 2.40 1.55 2.32 1.99
2,500.0 25.0% Current
Ratio 2.88 3.13 3.67 2.65 3.58 3.76
2,000.0 20.0%
A/R
1,500.0 15.0% Turnover 9.7 11.1 12.6 12.1 11.9 12.5
1,000.0 10.0%
ROE 15.4% 15.4% 17.3% 17.4% 17.7% 17.1%
500.0 5.0%
10.3% 8.1% 11.3% 11.9% 12.4% 12.2%
0.0 0.0% ROA
2011 2012 2013 2014 2015
35.00% 35.00%
30.00% 30.00%
25.00% 25.00%
Nike Nike*
20.00% 20.00%
Adidas Under Armour
15.00% Under Armour 15.00% Adidas*
10.00% 10.00%
5.00% 5.00%
0.00% 0.00%
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 6
*Includes also short-term investments
Overview and
Performance Environment Sustainability Conclusions
Opportunity
Performance by Segment
Only ~10% of revenues comes from outside North America high potential for growth in
other geographic segments
143 number of shops UA operates directly vs. 460 shops industry median (as of 2015)
No brand houses in Europe
Revenues by Geographic Segment
4000
3500
3000
2500
2000
1500
1000
500
0
2011 2012 2013 2014 2015
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Overview and
Performance Environment Sustainability Conclusions
Opportunity
Time
Introduction Growth Maturity Decline
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Overview and
Performance Environment Sustainability Conclusions
Opportunity
Financial feasibility
From a financial standpoint, UA has a strong enough balance sheet to successfully
establish directly operated stores in Europe
In particular the firms high cash balance and steep revenue growth, can guarantee the
necessary resources to sustain the long-term feasibility of the strategy
Main challenges
High level of competition in European market from Nike, Adidas and other strong
competitors, currently dominating the direct sale channel
Sunk costs due to considerable investments in fixed assets
Benefits Costs
Difficult to develop and integrate sales
Better coordination (time to market)
capabilities on a larger scale
Difficult to manage strategically different
Better control on distribution process
distribution channels
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Overview and
Performance Environment Sustainability Conclusions
Opportunity
11
Overview and
Performance Environment Sustainability Conclusions
Opportunity
12
References
2015 Under Armour Annual Report
2015 Nike Annual Report
2015 Adidas Annual Report
Thomson Reuters Eikon 4
Giarratana M. (2016). Strategy Notes. Milano: Egea.
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