When the US Olympic bobsled team sped to gold medal victory in Vancouver, its members were wearing suits of high-tech compression fabric engineered to keep them warm and dry while giving them ease of movement. The suits, made by Under Armour, were part of the Baltimore-based company’s strategy to gain global exposure and reach millions of potential consumers with the message that Under Armour helps athletes perform at a higher level.

Filling a Need Under Armour (UA) was started in 1995 by then-University of Maryland football player Kevin Plank, who hated how the cotton tee shirts he wore under his football jersey got sopping wet with sweat or rain. He made his own form-fitting shirt out of a high-tech fabric that wicked moisture away from the body. Several of his teammates wanted the shirts, too, and pretty soon a business was born. The company was incorporated in 1996, and Plank spent the next four years convincing college and NFL teams and players to start wearing tight-fitting synthetic shirts. Sports stars such as Jerry Rice and Roger Clemens became UA fans.  

Marketing Building brand awareness is key to UA’s growth strategy. The fourteen-year-old company has built a nearly billion-dollar business by outfitting high-profile athletes with its performance apparel, footwear and accessories, enticing millions of other athletes, amateurs and spectators to demand its premium-priced products as well. Acceptance by pros gives the brand authenticity that advertising alone cannot.  

Product Categories UA designs and sells shorts, shirts, jackets, leggings, pants and other apparel in compression, fitted and loose silhouettes for “heat,” “cold” and “all-season” use. All are premium-priced and bear the distinctive interlocking horseshoe-like logo. Unlike products of competitors such as Nike and Adidas, UA’s benefits are based largely on performance fabrics, primarily of microfiber polyester and spandex, which allow wearers to stay warm, dry and/or cool during workouts. One product is even designed to stabilize muscle tissue and reduce post-workout swelling. Footwear and accessories boast similar performance properties, with socks, shoes and hats that  keep extremities dry and comfortable.  

In 2009, 76% of sales were from apparel, down from 80% in 2008. Footwear totalled 16% of sales in 2009, up from 12% in 2008. The footwear category drove much of UA’s sales growth in 2009, when performance running shoes were introduced. The remaining 8% of sales were split between accessories and licensing royalties from foreign and domestic partners.

Distribution Channels Last year, 78% of revenues were from wholesale accounts such as Dick’s Sporting Goods, The Sports Authority, Cabela’s and other sporting goods specialty stores. A full 30% of revenues were from Dick’s and Sports Authority. A small percentage of sales came from international sales. The fastest growing segment of the UA business is Consumer Direct, comprised of its 4 specialty stores, 35 factory outlets, and e-commerce site. Consumer Segments Men’s apparel comprises the largest consumer segment for Under Armour, at about two-thirds of apparel sales, but the women’s and youth business are growing faster than men’s and now comprise about 25% and 10% of apparel sales, respectively.

Financial Performance has been impressive. Sales have enjoyed meteoric growth from under $20 million in 2001 to over $850 million last year. Sales grew 24% in the fourth quarter of 2009 and 18% for the year. Although gross margin took a slight hit last year due to some inventory liquidation, the margin’s recovery in the fourth quarter and resulting improvement in inventory position proved the strategy effective. Probably the most remarkable feat has been UA’s ability to grow sales without discounting, which few of its competitors were able to do in 2009. After declining in 2008, net income grew an impressive 22% in 2009.

Growth Potential The company expects to reach $950 million in sales this year by focusing on its wholesale apparel business, by continuing to expand its outlet and internet channels, and by growing overseas. Over the next couple of years, SG&A increases will be necessary to support topline direct sales growth and to staff growth areas such as footwear. The company plans to add another 15 outlet stores in the next year. UA spent $106 million, or 12% of sales, on marketing in 2009, down from 13% in the previous year. 

The Footwear Challenge Extending a brand successfully from apparel into footwear is rarely done - usually it happens the other way around. US says it does not expect a major new footwear introduction until 2011 despite enjoying 60% growth in footwear sales in 2009. In the fourth quarter, footwear’s share of total sales declined. Has Under Armour hit a stumbling block, or is it just doing its homework to avoid costly missteps? 

Strategic Issues Growing sales beyond $1 billion will require major product line develop-ments. Performance fabric developments and/or groundbreaking footwear innovations could give the brand an important competitive advantage and provide healthy sales and margin growth. UA should also consider high-margin categories such as performance outerwear, now the domain of The North Face and Burton. UA will also need to forge stronger ties with the Dick’s and Cabela’s of the world to gain floor space and market share, particularly as it encroaches on its key customers’ terrain by going direct. 

Will Under Armour meet its objectives? Given its track record, and the energy and skills of its management team, accomplishing some of these lofty goals should be, well, no sweat.

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