How Long-Term Changes Have Positioned Under Armour For a Strong 2022

All factors considered, Under Armour had a solid 2021 — following several challenging years.

Most recently, the company reported Q3 revenues of $1.5 billion, up 8% year over year. As a result, Under Armour raised its outlook and expects revenue to be up about 25% for the full year.

Given the brand’s strong performance in 2021, Baird Equity Research analyst Jonathan Komp named Under Armour as one his top ideas for 2022 in a Tuesday note and elevated it to an “outperform” rating. In his analysis, Komp called out Under Armour’s product innovation, DTC focus, and successful exit from certain stores in the off-price sector and said he anticipates mid-to-high single-digit annual revenue increases in fiscal year 2023. In addition to his thesis on Under Armour, Komp downgraded Wolverine Worldwide and Columbia Sportswear.

“We have been warming to the UAA story for much of the past year based on our positive view of management’s transformation actions aimed at improving full-priced selling in North America, emphasizing DTC and e-commerce, and re-investing in brand building activities especially top-of-funnel marketing efforts throughout 2021,” Komp wrote.

In 2020, Under Armour said it planned to cut ties with certain wholesale retailers, starting in the second half of 2021 to focus on DTC growth. In Q3, DTC revenue increased 12% to $604 million, driven by Under Armour’s owned and operated stores. E-commerce represented 33% of the total DTC business.

Komp noted that off-price currently represents about just 3% of Under Armour’s sales, as it makes its way towards exiting 2,000 to 3,000 stores in North America, its largest market. By the end of 2022, Under Armour aims to be in about 10,000 doors, executives said in 2020.

The plan, thus far, appears to be working. Williams Trading Analyst Sam Poser called out Under Armour’s DTC performance in Q3 in a note and also mentioned the company’s ability to handle supply chain issues that disrupted the entire industry.

“The better than expected 3Q21 is indicative of increased consumer demand, and management’s focus on building Under Armour for long strength rather than short term growth,” Poser wrote at the time.

Under Armour has also made a bid for the metaverse, releasing its first-ever digital good in the form of 2,974 NFTs, or non-fungible tokens, that are digital replicas of the Genesis Curry Flow shoe Steph Curry wore when he broke Ray Allen’s NBA three-pointer record on Dec. 14.

Rivals Adidas and Nike have also made moves into the metaverse recently, a trend that has appeared to please investors and analysts overall.

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