Concerns Abound For Under Armour As It Plans To Battle Nike Overseas
As Under Armour prepares to expand overseas, the company "is stepping onto a rougher playing field," according to Kyle Stock of BLOOMBERG. Selling jerseys, workout shirts, sneakers, and cleats outside the U.S. "doesn’t take rocket science; it just takes the cash required to sponsor pro teams and marquee events." For ages, adidas and Nike "have been locked in a spending arms race." Puma "was in the hunt for a while, but it faded in recent years" as it shifted some marketing focus from athletes to artists. The company issued two profit warnings in the past year and posted a 32% drop in income for the most recent quarter. Under Armour "does a lot of things well." However, the Baltimore-based company has "built its brand organically" -- largely without "big, splashy marketing campaigns." Indeed, Under Armour’s "value-bent marketing is one reason that shares of the company have done so well." Even though Nike consistently posts better results in metrics that matter to investors -- namely, return on equity and return on assets -- Under Armour's price-earnings ratio "suggests that investors value it much more highly than they do Nike." Under Armour "may be able to pick its spots abroad to generate some of the grassroots success it has cultivated" in the U.S. The company has already signed on as an official supplier of the U.S. women’s and men’s gymnastics teams for the next two summer Olympics. Then again, that "won’t help it" in the $5B global football market. Analysts "are worried" that the cost of int'l expansion "will serve as a drag on Under Armour’s otherwise-impressive performance" (BLOOMBERG, 6/4).