Sportswear Is an Attractive Category, but Under Armour Lacks a Competitive Edge

We view Under Armour as lacking an economic moat, given its failure to build a competitive advantage over other athletic apparel firms. Between 2008 and 2016, the firm’s North American sales (around 70% of its consolidated base) increased to $4 billion from $700 million and it passed narrow-moat Adidas as the region’s second-largest athletic apparel brand (after wide-moat Nike). However, its North America sales have not grown over the past five years as it restructured and demand for performance gear, Under Armour’s primary category, has lagged that of athleisure. While sales of all activewear have been strong during the pandemic, we think the long-term benefits for the company will be limited as compared with global brands wide-moat Nike and narrow-moat Adidas. We think Under Armour has fallen behind on innovation and its product is not sufficiently differentiated.