Under Armour 2008 Annual Report Download - page 36

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained in this section should be read in conjunction with our Consolidated Financial
Statements and related notes and the information contained elsewhere in this Form 10-K under the captions
“Risk Factors,” “Selected Financial Data,” and “Business.”
Overview
We are a leading developer, marketer and distributor of branded performance apparel, footwear and
accessories. The brand’s moisture-wicking synthetic fabrications are engineered in many different designs and
styles for wear in nearly every climate to provide a performance alternative to traditional natural fiber products.
Our products are sold worldwide and worn by athletes at all levels, from youth to professional, on playing fields
around the globe, as well as by consumers with active lifestyles.
Our net revenues grew to $725.2 million in 2008 from $205.2 million in 2004. We believe that our growth
in net revenues has been driven by a growing interest in performance products and the strength of the Under
Armour brand in the marketplace relative to our competitors, as evidenced by the increases in our sales of
apparel, footwear and accessories. We plan to continue to increase our net revenues by building upon our
relationships with existing customers, expanding our product offerings, offering new products, building our
direct to consumer sales channel and building our brand internationally. Our direct to consumer channel includes
sales through our retail outlet and specialty stores, website, and catalog. New product offerings included the May
2008 introduction of performance training footwear, which we began shipping in the first quarter of 2008, and
the January 2009 introduction of performance running footwear, which we began shipping in the first quarter of
2009. In addition, we have strategic agreements with third party licensees and distributors to further reinforce our
brand identity and increase our net revenues.
Our products are currently offered in over 17,000 retail stores worldwide. A large majority of our products
are sold in North America; however we believe that our products appeal to athletes and consumers with active
lifestyles around the globe. Internationally, our products are offered primarily in the United Kingdom, France and
Germany, as well as in Japan through a third-party licensee, and through distributors located in other foreign
countries.
We believe there is an increasing recognition of the health benefits of an active lifestyle. We believe this
trend provides us with an expanding consumer base for our products. We also believe there is a continuing shift
in consumer demand from basic cotton products to our performance products, which are intended to provide
better performance by wicking perspiration away from the skin, helping to regulate body temperature and
enhancing comfort. We believe that these shifts in consumer preferences and lifestyles are not unique to the
United States, but are occurring in a number of markets globally, thereby increasing our opportunities to
introduce our performance products to new consumers.
Although we believe these trends will facilitate our growth, we also face potential challenges that could
limit our ability to take advantage of these opportunities, including, among others, the risk of general economic
or market conditions that could affect consumer spending and the financial health of our retail customers. In
addition, we may not be able to manage our growth effectively and consistently be able to anticipate consumer
preferences and develop new products that meet changing preferences in a timely manner. Furthermore, our
industry is very competitive. Our profitability may decline if we experience increasing pressure on margins, if we
lose one or more of our key customers or if our competitors establish the brand loyalty of our current or potential
consumers. While we seek to diversify our manufacturer base to minimize the risk of interruptions in the supply
of raw materials for our products and have what we believe is a diverse manufacturing base globally, we may
still be susceptible to general economic changes such as increases in the costs of raw materials, including
petroleum, which is a significant component of many of our products, or other disruptions in international trade.
For a more complete discussion of the risks facing our business, see “Risk Factors.”
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