Under Armor: The Best Athletic Apparel for Men, Women, and Kids

Success Factors and Risks Affecting Current and Future Performance of Under Armour 

Under Armour’s Financial and Strategic Priorities 

Taking to account the record progressive performance that the company has registered in the last two years, it is certainly the fact that the positive financial performance is founded on certain priorities that the company has undertaken with regard to its financial management and strategies. First, a look into the company’s organizational structure reflects a management that is both efficiency-oriented and growth-oriented. Again, it is apparent that the company has a board of directors under whom the CEO is advised. Such a strategy reflects the greater extents to which the company prioritizes efficiency in terms financial decisions made by the management. These decisions must be informed by the position of the board of directors. It is therefore certain that the checks and balances established by the board through the board committees that advice executive officers (regarding audit, compensation, corporate governance and finance) forms one of the factors upon which the success of the company may be attributed. The company’s business decisions to this extent are soundly informed and effective. 

On the other hand, the company has also prioritized on varieties including having options of different product lines in the specialization of sportswear. This reflects a systematic risk kind of approach that the company has resorted to in terms of having influence of a large number of assets that it has to bear in its portfolio (Palepu, Bernard and Healy, 2007). Such prioritization in variety of options hence affects its accounting procedure that to this effect have to account in terms of fiscal analysis for all the variety of sportswear dealt in. 

Capitalization on Non-Financial Factors 

An analysis of the market reflects various competitors that the company is face with in its industry. These include major incorporations such as Adidas and Nike which enjoy predominance especially in terms of their dominant market-share. In its qualitative approach with regard to management and accounting, it is also important that the company invests in other non-financial factors that would shift the dynamics to its favor with regard to market share. First, in addition to the three support programs in which the company has been involved in during its corporate social responsibility – UA Power in Pink, UA Freedom and UA Win Global – it is also important for the company to surge its frequency of being directly involved in various facets of the world community in order to build its reputation further relative to matching its competitors efforts in this aspect. 

Significant Internal Risks to Company’s Performance 

With regard to the company’s internal risks that affect the company’s performance, one of the important operational aspects to consider include the UA’s shipping options and its return and exchange policy. First, with regard to its shipping options, it is manifest that in a quest to match its competitors, the company has set out various affordable shipping options that vary depending on urgency and customer convenience. First, the company establishes distinct shipping methods which vary in terms of duration within which such products would be delivered, which as well bear varying prices. The risks in this aspect relate to free delivery that has been accorded to various categories of transactions for example delivery of goods valued at $150 and above that should be delivered through US Postal Service within 3 to 5 business days of purchase. Such free delivery, despite being attributed to delivery within the U.S bear great contribution in terms of attracting a greater number of sales; which is a sound risk taking to account the strategic impact the policy bears. 

On the other hand, the return and exchange policy of the company reflects a lenient policy that may affect the company’s performance or may be attributed to fettering a higher rate of growth than currently exhibited. For instance, the policy provides for procedural mechanisms that allow for return and exchange of products purchased within the U.S.A. for free within 60 days. The risk to this effect is in relation to the duration provided for and the fact that such transactions involving returns and exchange may vary accounting in the company and further, the duration may be detrimental in terms of deterioration of the value of the products within that period. 

Projections 

Consolidated Financial Performance in the Next Three Years 

With the positive trend set by the company in its financial statements in the last two to three years, it is anticipated that such elements as total revenue generated by the company may at least increase by at least 25% in the next three years. This is informed by the fact that in the previous year the company’s revenue has exhibited growth by 21%. This is with assumption that the microeconomic policies within the U.S. economy do not exhibit significant changes; besides the fiscal policies since there are very low chances of legislations relating to tax or any relevant spending provisions. Similarly based on those assumptions, the gross profit generated by the company is expected to increase by 19% a positive increase from the previous year’s 17.5% increase. Projections with regard to other factors including the interest expense, operating income and net income are also expected to record slight growth are reflected in the projections in the Appendix. 

Elaboration on Best and Worst Case Scenarios 

With regard to the best and worst case scenarios, it is apparent that from the recorded trends, the various elements of the financial statements are expected to either register augmentation in the best case scenario or register half the preceding growth rate in the worst case scenario. This is not only informed by the trends set by the company in the previous years, but also by virtue of the fact that such economic factors affected by the domestic monetary policies, fiscal policies, microeconomic policies and exchange rates are not prone to exhibit significant changes and even such changes that maybe to the detriment of the company may only lead to steady trends registering no growth nor deterioration. The specifics in relation to the same would be provided in the appendix below. 

Discussion on Assumptions 

Apart from the presumptions informed by the various economic factors, the projections in the next three years are inclusive of factors such as the company’s priorities, mission and vision in terms of its objectives. The positive projections are informed by the company’s priority in terms of qualitative management and the constraints relating to decision making processes in the company. The projections are also informed by the risks that the company have resorted to, which upon analysis appear to be sound and appropriate. 

To this extent, it is certainly the fact that such economic factors such as domestic monetary policies may not affect the company’s rate of growth negatively. This is attributed to the premise that the company’s management strategy in terms of risk management and priorities might not register any detrimental financial impacts to the company. 

References 

Palepu K. G., Bernard V. L., Healy P. M & Peek E. (2007). Business Analysis and Valuation: Texts and Cases. Cengage Learning EMEA 

Under Armor Investor Relations. (2017). The Business of Under Armor . Retrieved October 8, 2017, from Under Armor Investor Relations: http://investor.underarmour.com/annuals.cfm . 

Appendix 1: Projections 

Appendix 2: Best and Worst-Case Scenario