On December 12, 2018, Under Armour hosted its first analyst day since 2015. Following two years of transformation, Under Armour has built its new five-year plan around two strategic priorities: protect and perform. Elevating the Under Armour brand will entail innovation, consumer centricity and selective wholesale distribution while returning to the brand’s core: athletic performance and the “Focused Performer” customer. Patrik Frisk, who joined Under Armour in 2017 as President and COO, articulated a demand-centric growth strategy. After consumer research with 22,000 individuals, the company identified its core consumer as the “Focused Performer,” reflecting the company’s authentic athletic roots. This is a more engaged consumer, who offers the potential to create brand advocates. The “Focused Performer” total addressable market (TAM) is $92 billion, a subset of the $280 billion athletic apparel and footwear market. Frisk said a third of consumers under 25 years old use Instagram in the shopping journey, typically during the evaluation and loyalty stages; Amazon and Alibaba play a role in a third of all journeys, yet most consumers (and the majority of Under Armour shoppers) undertake physical shopping journeys. Under Armour will target International, China, footwear, women’s and direct-to-consumer (DTC) as growth opportunities. The company sees DTC digital growing at a 12%–14% five-year CAGR and DTC Retail at a 6%–8% five-year CAGR, with 2,600 mono-branded Under Armour owned and operated and partner locations by 2023. Under Armour projects footwear will grow 10%–12% on a compounded annual basis through 2023 to represent 25% of total category sales, outpacing accessories and apparel, both projected to achieve a 5%–7% five-year CAGR.

By the Numbers

2023

Under Armour expects revenues to return to a low double-digit growth rate by 2023 with a mid-to-high single-digit five-year CAGR, driven by International (+17%–19%) and DTC businesses; Under Armour expects its North America business to grow 1%–3%. It also said it expects gross margin expansion of 275–300 basis points (bps) to reach 48% and an annual operating margin in the low double-digit percentage by 2023 (versus ~3% this year). EPS is forecast to grow at a 40% five-year CAGR. With annual cash flow from operations targeted at $700 million, the cumulative cash flow generated in the 2019 to 2023 span is expected to be approximately $2.5 billion.

Updated 2018 Outlook

The company made no change to its previous guidance of 3%–4% revenue growth, reflecting a low single-digit decline in North America offset by 25% growth internationally. Under Armour sees an adjusted gross margin of 45.4%–44.5%, up 20–30 bps; adjusted operating income of $160 million to $165 million versus previous guidance of $150 million to $165 million; and, adjusted EPS of $0.21–$0.22, versus previous guidance of $0.19 to $0.22.

Initial 2019 Guidance

Under Armour is targeting 3%–4% revenue growth in 2019, reflecting a low double-digit growth rate internationally, offset by relatively flat results for North America. Gross margin is projected to expand 60–80 bps as Under Armour reduces sales to the off-price channel, supply chain initiatives and DTC growing its proportion of total sales. The company projects operating income of $210–$230 million; EPS of $0.31–$0.33 and capital expenditures of $210 million.