Under Armour (NYSE:UAA) (NYSE:UA) announced new connected shoes in December, thereby doubling down on connected footwear. These shoes follow an array of new shoes announced in 2016 across multiple categories, all of which are helping Under Armour to gain more footing in this market. With new styles making headway into new markets, Under Armour’s expanding footwear opportunity could blow right past the sales forecasts management set last year.
A leg up in the footwear field
Under Armour’s newest connected shoes link up to a user’s account on Under Armour’s MapMyRun mobile app, and are “designed to provide runners with the digital tools needed to understand recovery and ultimately maximize performance,” according to an Under Armour release. The shoes use pre-run tests to give runners insight into muscle fatigue prior to working out. These three new styles are upgrades from similar connected shoes that track a runner’s distance, cadence, and other stats that were released as part of Under Armour’s connected fitness and wearables push in January.
Basketball and running seem to have been leading footwear sales in 2016, but Under Armour is continuously growing into other types of footwear as well. Among its interesting 2016 footwear releases was the first 3D-printed cross-trainer called the UA Architech, the company’s first ever golf shoe which pro golfer Jordan Speith wore during the 2016 Masters Tournament, as well as new styles within baseball, training, fishing, hiking, and various other sports. Under Armour is also growing its more casual-focused styles (including shoes) as part of the new Under Armour Sportswear fashion line.
Aside from connected shoes, running has been an important segment for Under Armour in 2016. The Bandit 2, a relatively inexpensive running shoe that was launched this year, has received high industry ratings. Basketball has been another growth driver for Under Armour in 2016, continuing on with the success of the Curry line following UA-sponsored NBA MVP Steph Curry’s own continued success. The recently launched Curry 3.0 shoe has faced questions lately following third-party retailer comments that they haven’t been selling as well as earlier versions. The Curry 3.0 was only launched in October, so we’ll see in fourth-quarter earnings how well that version has actually sold, but demand for the whole line throughout the year has been high.
The growing footwear opportunity
Within the athletic apparel market, footwear looks to be a growth opportunity. According to analysts at Global Market Insights, the athletic footwear market is expected to grow 3% per year on average from 2016 to 2023. That might not seem like a lot, but the market was an estimated $80 billion worldwide in 2015, so that 3% growth represents billions in new sales both from increased unit shipments and higher average prices per shoe. Other than the market itself growing, Under Armour is also chipping away at market share held by industry behemoths like Nike (NYSE:NKE) and Adidas (NASDAQOTH:ADDYY).
The growing market and Under Armour’s competitive push to expanding its footwear line bode well for the company. For the first three quarters of 2016, footwear has far outpaced every other category in year-over-year sales growth (save for connected fitness, though that segment makes up just a small slice of Under Armour’s total revenue). With all of these new styles announced in 2016, Under Armour’s growth potential in this market continues to rise.
|Segment||Sales, First Nine Months of 2016||Sales, First Nine Months of 2015||Change (YOY)|
|Apparel||$2.3 billion||$1.9 million||19%|
|Footwear||$786 million||$511 million||54%|
|Accessories||$302 million||$250 million||21%|
|Connected fitness||$24 million||$13 million||71%|
|Licensing||$62 million||$36 million||18%|
|Total||$3.52 billion||$2.79 billion||26%|
How Under Armour could sprint past its previous sales goal
Under Armour’s growth in footwear won’t go unchallenged by Nike and Adidas, and each are coming out with new styles and innovations of their own — such as Nike’s new $720 self-lacing shoe, and Adidas’ 3D-printed running shoes that launched in December. Still, Under Armour’s momentum in this segment looks like it could be on pace to blow past its previous forecast.
When Under Armour forecast last September that it would reach $7.5 billion in sales by 2018, management noted that they expect $1.7 billion of that to be footwear sales, or about 22% of the total. That would be about 2.5 times the $678 million it reported in full year 2015, or about 35% on average each of the next three years. For 2016, expected year-end growth around 50% already far outpaces that previous sales goal, and footwear already makes up 22% of total sales. With so many new styles and a worldwide market that’s expanding by billions of dollars per year, Under Armour looks on pace to blow right past that 2018 footwear goal.
Seth McNew owns shares of Nike, Under Armour (A shares), and Under Armour (C shares). The Motley Fool owns shares of and recommends Nike, Under Armour (A shares), and Under Armour (C shares). The Motley Fool has a disclosure policy.
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