Financial analysis of business expenses and sales profitability

¶ … Armour Analysis

Under Armour

The Under Armour company makes sports clothing as well as accessories. It is an American company. It mainly focuses on sportswear of the hi-tech variety that is marketed to professional athletes. However, anyone can buy clothing from the company. It offers sportswear as well as apparel that is more casual, and also started offering footwear only a few years ago. It has won awards, and has many sponsorship deals with everything from Football to Martial Arts. Discussed here will be sales and revenue information, along with financial and market analyses, the opinion of Under Armour on Wall Street, a brand history of the company, and information about one problem the company faces.

Sales

As of fiscal year 2009, Under Armour saw sales revenue of $856 million (Under, 2009). Naturally, that will fluctuate each year with the economy, new products and lines, and other factors that can affect sales numbers.

Gross Profits

Fiscal year 2009 brought about $770.7 million in revenue after operating income had been subtracted (Under, 2009). Of course, there is more to subtract before the final profit numbers are tallied, and net profits are often far lower than gross profits due to all of the other expenses that must be removed from the earned revenue.

Cost of Doing Business

The cost of doing business is often difficult to determine because there are many variables that companies do not readily provide to the public. However, for fiscal year 2009 the cost of doing business worked out to roughly $38.5 million (Under, 2009).

Market Analysis

Under Armour does well as a company in the marketplace because it is based in the U.S. But caters to a worldwide audience (Barnett, 2008). It does not matter what country an athlete (or anyone else) lives in, because it is possible for that person to buy what he or she needs from Under Armour. That is great news for anyone who wants to purchase from the company, but it also means that the company spends quite a bit to package and ship its products. Another issue that Under Armour must look at is the level of marketing it is doing to those who are not athletes (Barnett, 2008). By marketing mostly to athletes, it is possible that Under Armour is missing out on a large market that it has not tapped into and that could help its brand grow further. There are other areas of the market where Under Armour is not appreciated and where its name might not even be recognized. If it wanted to, the company could change that and possibly see a significant jump in sales. Of course, it would have to spend money to make money in that instance, so that would be something that would need to be very carefully considered in order to make sure it was cost effective (Terry, 2010).

Financial Analysis

According to the sales and revenue figures for Under Armour, the company is performing well. It has a positive cash flow, and its operating expenses and cost of doing business are not too high for the amount of revenue it has coming in each fiscal year (Terry, 2010). Its total assets and total equity numbers are also both above $400 million (Under, 2009), so the company is holding onto some of its money instead of paying it all out to cover its debt. That is the sign of a company that has more income than what is going out, and it is also a sign of a company that is not too far in debt. All large companies have credit lines, but that does not mean all companies are irresponsible with money. Under Armour appears to understand this and be committed to taking care of its financial obligations as well as its customers.

Wall Street Opinion

The opinion of Wall Street is important, because it provides an indication of what investors and financial professionals think about the company. Because Under Armour is a publicly traded company on the stock exchange, it is easy to see how it is trading - which gives a good indication of what Wall Street thinks of the company itself. Under Armour's stock is relatively stable, which is a good thing (Terry, 2010). Wild fluctuations indicate a high degree of uncertainty, and so does a rapidly falling stock price. When stock prices rise too quickly, people start to speculate that the price might quickly and suddenly fall, so that can stop investors from being interested. When stocks are relatively stable over time but have a slight upward trend, investors feel more comfortable with the company. It is growing, but that growth is realistic and steady. That is more indicative of a company that is aware of what it is doing and that is taking the right steps to ensure its financial future. Because Wall Street sees that in Under Armour, the company is favored on Wall Street and is a good choice for anyone who is interested in investing in solid U.S. companies that are going to be in existence for the long haul (Terry, 2010). Those looking to make a quick profit and then dump the stock should steer clear of Under Armour, because it is poised for slow and steady growth.

Short Brand History

Under Armour was founded in 1996, so it has come a long way in a relatively short period of time (Terry, 2010). Unlike many apparel companies that have been around for decades, Under Armour is still considered by many people to be a new company. The business was started out of a basement, and took off rapidly because it made clothing that really catered to athletes and what they needed. The founder, Kevin Plank, was an athlete himself, so he knew what kinds of problems athletes were facing when it came to apparel. That was what prompted him to begin designing something better. Word of mouth fundraising brought him over $17,000 in 1996. In the following year, he was already trying to fill more than $100,000 in orders and the company was beginning to take off (Terry, 2010).