How important is ‘athleisure’ as a trend that’s impacting sales figures for sportswear companies? Well, sports brands never really own up to that. But the sales growth some of the big names are seeing suggests that it’s a real sales driver. Just look at Under Armour’s latest results.
The company released its Q4 figures yesterday, turning in a an eye-popping 31% revenue rise to $1.17bn. Wow. You don’t get that form just selling to committed sports and fitness fanatics.
Under Armour is one of those companies that has really been benefitting from the athleisure trend and while yesterday’s upbeat news wasn’t all about sportswear as a lifestyle choice (rather than a sports one), the lifestyle factor obviously did loom large.
Interestingly, lifestyle is giving a major boost to sports clothing sales. Where once upon a time all the sexy news was about footwear, now apparel is enjoying its time in the spotlight.
Apparel sales for Under Armour rose a massive 22.2% and at $864.8m in the three months to December 31 they obviously make up the biggest chunk of the firm’s revenue, driven by demand for training, running, golf and basketball duds. Obviously, you don’t see 20%-plus growth in each quarter for 25 consecutive quarters by just supplying clothes for active sports. That means a lot of people bought those training, running, golf and basketball pieces for working in, for relaxing, posing and partying in… as well as for getting fit.
Footwear had a good quarter too though, with sales almost doubling to $166.9m as new running shoes and the signature Stephen Curry basketball line proved hugely popular. Again, you only have to look around any group of friends at work or off-duty to see how even the most high-performance shoes have transitioned from the track and court to the bar and office.
And accessories sales soared as well, rising 23% to $97.1m, driven primarily by new bags.
Meanwhile online sales grew 25% in Q4 and now make up 36% of total Under Armour revenue, and international net revenues rose 70% (or 85% currency-neutral) to make up 12% of the total.
That all helped net profit to rise 20.4% to $105.6m, or 48 cents per share, making me wish I owned some Under Armour shares!
Can this impressive performance continue? Well, the firm expects revenue growth of 25% this year so… yes. That prediction obviously countered any worries investors may have had that the athleisure trend fuelling such explosive growth might end any time soon.
Some analysts and investors were worried about reports that Under Armour is losing womenswear market share – a particularly disconcerting thought given that women are helping to drive the athleisure trend. The Wall Street Journal quoted data from SportScanInfo saying the company saw a 7.7% drop in womenswear sales in December (compared to a 6.6% rise for Nike). But Under Armour has countered this saying the data captured only represents 40% of its business (it doesn’t include wholesale or online sales, for instance).
Yet there are still some downsides in Under Armour’s performance. The company’s margin slipped in Q4 as it boosted inventory levels to ensure it could meet demand and keep shelves stocked. The negative aspect of this high inventory level is unsold product that ends up being marked down.
And lower margins make analysts nervous, especially when they’re already worried that a fashion trend (athleisure) fuelling massive sales growth could flip suddenly and become yesterday’s fashion news.
But is athleisure really a fashion trend any more or has it evolved into a true lifestyle phenomenon that’s a reflection of society’s increasing move away from formal clothing?
I’m inclined to think the latter. In many ways it’s the logical conclusion of a trend that started over 50 years ago and I don’t think it’s going to go away, even when the fashion pendulum swings in another direction.
So, assuming that athleisure is here to stay and that the firm’s power growth can continue (for a while at least), what will Under Armour be offering this year to make it happen?
- CEO Kevin Plank said the firm will deliver new iterations of signature product across premium price points and distribution throughout this year.
- It’s doubling its “elevated running” offerings priced above $100 including the launch of its first smart shoe, SpeedForm Gemini 2 RE, and SpeedForm Slingshot, made with a 3D knitting process.
- In apparel, it will debut two new HeatGear apparel cooling technologies, Microthread and CoolSwitch, while also launching a proprietary ColdGear insulation story called Reactor.
OK, a lot of people are going to buy into that sport-focused tech for nothing more vigorous than the walk to the bus stop. But the company is also going to offer plenty for the true fitness-focused community, not only with clothes and shoes, but via major developments in Connected Fitness.
Earlier this month at the Consumer Electronics Show, it unveiled the new UA Record, the digital dashboard app for health & fitness, and a suite of new products led by Under Armour HealthBox, which it described as “the world’s first complete Connected Fitness system.”
And while all that can help consumers monitor their fitness, importantly, it can help Under Armour monitor its consumers too! OK, that’s not as creepy as it sounds. The company isn’t watching us. But CEO Kevin Plank did say it could achieve a “more complete picture of our consumer,” adding: “We are establishing our data-driven math house that will provide us with real-time information to make better decisions and build even better products. More importantly, it will provide deeper insights, recommendations, and personalised content.”
So there you have it – something for everyone no matter how fitness-focused you are. As for me, I think I’ll stick to the hoodie and leggings for lounging around and watching TV…