Under Armour: Financial Performance Overview - $7.92B Market Cap, Growing Debt - Essay Sample

Financial Performance Overview

Under Armour has a market capitalization of $7.92billion (Lyons, 2019). Importantly, the company is performing well financially, considering that its operating cash is enough to cater for the existing debts. In the last year, the firm's debt levels have increased, which are inclusive of both the current and long term debts. However, regardless of the growth in debt, the short term investments and the current cash in the firm are at $312.48 million, which is an amount that the company could deploy to its operations (Lyons, 2019). In addition to that, the firm generated cash amounting to $234.06 million through the last year hence leading to a debt ratio of 25.52% (Lyons, 2019). From this analysis, the level of operating cash in the organization is enough to cover the debt levels. Thus, this implies that Under Armour earns substantial profits from its operations.

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Similarly, the liabilities of the firm stand at $1.06billion (Lyons, 2019). Over the years, the corporation has maintained a safe level of current assets designed to meet its obligations. Moreover, the debt to equity ratio of the organization is 45.63% (Lyons, 2019). The debt to equity ratio shows that UA relies primarily on debt to fund its operations. However, although the debt levels in the firm are high, the corporation can effectively utilize its borrowings to generate regular cash flow.

SWOT Analysis

Strengths

The broad product portfolio has had a significant role to play in strengthening the firm's financial standing. UA is not dependent on one product. As seen earlier, the corporation deals with the manufacture and sale of footwear, apparel, and accessories. The great product line is an advantage since it eliminates the risk of failure by enhancing a high sale ratio.

UA has a secure distribution network. The company witnessed accelerated growth in the market. The growth and development of the market are possible due to the utilization of creative strategies of operations. Notably, about 65% of the revenues accrued in the firm were gathered through wholesale distribution while the rest was acquired through direct consumer sales ('Under Armour SWOT Analysis,' n.d). Licensing is the primary strategy employed by the firm when selling in international nations. The modifications made in the operations have helped in expanding the brand internationally.

Weaknesses

One of the main weaknesses of Under Armour is the limited operating presence. Importantly, the company generates about 83% of the North American markets. Mainly, this shows that the firm's growth is dependent on the American markets (Thomas, 2019). Expanding to other regions is crucial in sustaining the overall growth of the firm.

Further, Under Armour has high investment expenditure. UA has taken a risk with its top investment in the past years. As time oases by, the organization continues to add to the spending. The high investment expenditure limits the ability of the firm to acquire new acquisitions and generate more revenue.

Opportunities

The company has the opportunity of introducing new products. As seen earlier, innovation is one of the company's strengths. The technological advancements give the company leverage to offer better commodities with the required modifications. Extending the product line would attract a new customer base.

Consequently, the corporation has the opportunity of generating more sales and getting more customers by expanding to international markets. Since it grew to Europe, Under Armour has experienced a sales growth of 57% ('Under Armour SWOT Analysis,' n.d). The figure shows a promising future once the firm expands to international markets.

Threats

Political polarization is one of the threats facing the organization. The company was involved in a controversy in Trump's administration, where the CEO supported Trump and withdrew once his actions were publicly realized (Fabian & Sink, 2019). Such disputes threaten the working capability of the institution in the event of political polarization.

Consequently, Under Armor faces the threat of increased competition. The major competitors include Adidas and Nike. The two competitors have higher brand recognition when compared to UA. As such, competitors have a stronger customer base that threatens the ability of UA to function profitably in the future.

Evaluation of Company Strategy

Overall Strategy

Under Armour's overall strategy entails marketing the expanding product line in the firm to attract a new customer base. As mentioned earlier, the company deals with the production of apparel, footwear, and accessories. The current customer base is primarily athletics persons. With technological advancements, the company is working towards the manufacture of different other product lines that will attract a new range of customers.

The second strategy entails expanding the sale of products sold in under Armour to foreign and international countries (Denman, 2016). The corporation intends to be a global competitor in the market for sports, apparel, and other performance products. By expanding to foreign nations, the overall sales accrued in the firm are likely to increase.

The third strategy includes utilizing endorsements and advertising that will foster heightened consumer demands for products. Mainly, this strategy is critical in creating and building brand awareness of UA as a leading performance of the athletic brand. More so, the increased awareness of the brands could attract new customers hence leading to increased amounts of revenues.

Recent Strategic Initiative

From the announcements made by UA's CEO, Kevin Plank, the company has made some strategic initiatives to ensure that the products reach an array of audiences. The main areas are channels, categories, and geographies. Importantly, Under Armour is an essential company that could define an omnichannel (Denman, 2016). The business brand often operates its retail stores, ecommerce sites, and mobile retailing platforms. In recent years, the firm has witnessed a growth in its direct-to-consumer sales, licensing revenue, and connected fitness revenues as well. Although the firm has primarily focused on wholesale business, it is aggressively improving its direct-to-customer channels. The firm operates about 160 stores in North America, which consist of 146 factory house stores. More stores are expected to be constructed in New York City (Denman, 2016). The plan, as explained by the CEO, is to build a retail facility that provides customers with exciting customer experience.

UA has expanded its categories to include Under Armour Sportwear, which is a line of clothing designed to be used off the field. In a bid to promote the new products, the company has selected Tim Coppens as the new creative director. Coppen is a reputable fashion designer. The central role of expanding the product line is to bring consumers to the brand sold at Under Armour.

Consequently, the firm intends to grow its retail footprint in the North American region. More so, it is looking to increase its profits internationally. UA's e-commerce in countries such as China is experiencing bountiful growth. The company intends to expand its international presence, which is another strategic initiative employed.

Conclusion

Under Armour (UA) is a firm that deals with the manufacture of apparel for use in sports and off the field. Despite intense competition, the company continues to prosper due to its strategic initiatives. From the analysis made in this paper, it is clear that UA still has some financial challenges. However, the vital steps undertaken by the firm's CEO have made the firm a significant competitor in the clothing and apparel industry.

References

Denman, T. (2016). Under Armour's Three Strategic Steps to Connect With Consumers. Retrieved from https://risnews.com/under-armours-three-strategic-steps-connect-consumers

Fabian, J., & Sink, J. (2019). Trump to Land at Under Armour's Headquarters: Campaign Update. Retrieved from https://www.garp.org/#!/risk-intelligence/all/all/a1Z1W000003mJJiUAM

Lyons, E. (2019). Under Armour wants to be a 'louder brand' as it looks to turn 'each marketing dollar spent into three'. Retrieved from https://www.marketingweek.com/under-armour-on-being-a-louder-brand-and-turning-each-dollar-into-three/

Roberts, D. (2011). Under Armour Gets Serious. Fortune, 164(7), 152-162. Retrieved from https://fortune.com/2011/10/26/under-armour-gets-serious/

Thomas, L. (2019). Under Armour's North Ame...