Over the past five years, Under Armour, Inc had 29% average growth of sales a year. Astonishing growth for Under Armour in well-established sportswear industry is supported by tripled increase in assets since 2010. Interestingly, Under Armour did not increase its long term liabilities, particularly debt, over same period of time. Increase in value of assets was supported by increase in owner’s equity, which has triples since 2010.
The purpose of this part of the report is to evaluate Under Armour, Inc. current performance based on DuPont analysis. Nike, Inc., Adidas Group, and Puma SE are three benchmark companies chosen for the analysis.
Financial ratios analysis
Return on equity
In 2014, return on equity in for Under Armour, Inc. was
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had a notably higher profit margin of 48-49% than its competitors of 45.8-46%, thus Under Armour, Inc. spends 3 to 4 cents fewer per dollar on production than it competitors. This cost advantage is achieved by outsourcing production and distribution overseas, but leaves the company vulnerable to macroeconomic and political factors (Under Armour, 2014).
Outsourced production and distribution leaves Under Armour, Inc. only with office operating expenses of 35.22% of revenues, that gives the company lower operating expenses than its competitors average of 36.45% in 2014. Despite the average operating expenditure of 36.45% in 2014, Nike, Inc. managed to sustain 29-30% operating expenses over the past three years. Under Armour, Inc. overpays for operating expenses than its major competitor, Nike, Inc. After accounting for all expenditures, Under Armour, Inc. has higher pre-tax margin compared to benchmark companies in Table 2, except for Nike, Inc. All four companies have similar depreciation expenses of 2 cents per dollar and similar interest expenses of 0.5 cents per dollar. Occurred differences in pre-tax margin are mainly due to differences in cost of goods sold and operating expenses. Under Armour, Inc. outperforms competitors in gross profit margin and operating profit margin, however falls behind Nike, Inc. in its operating
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made a big appearance in the sports apparel market, has been steadily growing as a company, and has room for growing abroad profits, it can be concluded that decreasing total asset turnover means that the company is preparing to grow even bigger. Over the past three years, Under Armour, Inc. added $120 millions of goodwill, increased cash holdings by $250 millions to $593.2 millions, and increased fixed assets by $120 millions. Also, over the past 5 years Under Armour, Inc. had 29% average annual growth rate in revenues (Under Armour,