Under Armour (UA) never ceases to amaze me.
Just when I think the company's growth could be nearing a peak, it delivers a blowout quarter. Or when I think the company isn't moving fast enough in a certain area (say international store openings), it manages to show me that couldn't be further from the truth. (Under Armour is part of TheStreet's Growth Seeker portfolio.)
All in all, after spending a good portion of Tuesday touring Under Armour's new U.S. manufacturing plant in its Baltimore back yard and talking with execs and suppliers on hand, one thing was reinforced: It's going to be darn hard to bet against this company. And naturally one will have the urge at some point to bet against Under Armour, say after a quarter in which footwear sales grew 51% compared to 53% in the prior quarter or when valuation appears to be stretched according to a random sell-side analyst. But boy, it's going to be hard to cling to a short-term view on a company that still has a very promising future long term.
A couple of things that stood out to me from the trip:
CEO Kevin Plank: Investing in companies that are still being led by founders could be both good and bad. On the positive side of the ledger, founders are often special people -- they see the world differently and move like hell to try to bring their vision to life. Great example: Starbucks' (SBUX) Howard Schultz. One drawback, however, is that founders don't delegate successfully to others, which could trip up a brand's growth. (Starbucks is part of TheStreet's Action Alerts PLUS portfolio.)
But above all else, it's important to have a very engaged founder when it comes to billion-dollar businesses. They are, in effect, the face of the franchise. I remain impressed with Under Armour's Plank -- the guy just operates on a different level compared to other CEOs, founders and retail execs. He is incredibly engaged some 20-plus years after founding UA, but knows how to delegate. He has a robust vision for the company and is taking no prisoners in trying to bring that vision to life. Plank is a founder you bet on, plain and simple -- I don't see him going anywhere any time soon.
Product innovation: Nothing I saw at the facility on Tuesday suggested Under Armour has reached a peak in product innovation. And that is incredibly important given that UA remains valued as a growth company that is changing the status quo in athleticwear. I think the company will make a big push later this year with pricey 3-D-printed sneakers (first version launched in March sold out in 18 minutes despite a $300 price point), and will find some way to use 3-D printing to make apparel. I wouldn't be shocked to see a UA T-shirt with hologram technology within the next five years.
The company is taking product design down to the very nuts and bolts -- not unlike Nike (NKE), to be fair -- but again it's good to see the company's through processes on what constitutes true innovation. Not to mention it's good to see the high level of talent the company is attracting to help it develop the next "must have" shoe or T-shirt.
Supply chain innovation: Both Nike and Under Armour are nearing an overhaul of their supply chains to make them more responsive to consumer needs and more automated. For both companies, I think it will mean lower labor, warehouse and shipping costs. But I do get the sense that Nike remains overly focused on contracting with Asian suppliers for the cheap labor it has used for years and planning orders months in advance (this view is open to change if Nike ever decides to stop being absurdly closed off to media due to its ingrained arrogance). To me, it's a dying model that needs to be evolved.
UA is taking a stab at it by bringing some manufacturing jobs back to the U.S. and piloting new automation technology that could be used across the U.S. and overseas. I think the efforts will pay off over time, especially as consumers will be increasingly shopping on demand and will expect their sizes and colors to always be in stock.