Under Armour (NYSE: UA, UAA) is thinking outside the box in an effort to regain its impressive sales growth of years past. According to Baird analyst Jonathan Komp, Under Armour’s new ArmorBox monthly subscription service is a step in the right direction.
Under Armour launched its subscription box service this month. Subscribers set up a free ArmourBox account, fill out a personal profile with merchandise preferences, and receive a new box of Under Armor merchandise in the mail every 30, 60 or 90 days. The merchandise is selected based on each subscriber’s customized profile and chosen by a personal stylist. Customers only pay for the items they wish to keep and return the remainder free of charge. If they keep everything in the box, they get a 20 percent discount on the total cost.
Komp says the subscription model has been popular in the business world in recent years, but few retailers have gotten in on the action.
“Following our positive initial testing of the service, we believe ArmourBox could help to differentiate UA from its branded athletic peers, which largely are unavailable via tailored subscriptions, and to become an effective tool for acquiring and engaging consumers (mostly women) by leveraging the company’s growing data capabilities,” Komp says.
For years, Under Armour reported revenue growth above 20 percent. However, in the face of heightened competition from Nike (NKE), Adidas and others, Under Armour’s revenue growth has dipped into the single digits in the past two quarters.
Even after selling off by more than 55 percent in the past year, Under Armor stock still trades at an elevated forward price-earnings ratio of 39.9. Komp says longer-term investors should be thinking beyond the difficult environment Under Armour is facing over the next year.
“The stock remains undeniably expensive when looking on near-term depressed earnings, but we argue reasonable for those willing look out 12-plus months to more normalized growth/profitability,” he says.
ArmourBox may not be an overnight game-changer for Under Armour investors, but it represents the type of aggressive forward thinking that could fuel a long-term recovery for the stock. On Monday, the Wall Street Journal reported…
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