Three interesting callouts after a 'post daylight savings time' morning of online checks and research...
1) The rate at which Zappos is growing out its apparel offering is notable. Pay attention there. One of the few things that can stun growth there is internet taxation (like we saw in Texas two weeks ago). Separately, Amazon's apparel has been atrocious in the past. It's still nothing to write home about. But better on the margin? Definitely. Are we at a point yet where the two combined are 1+1=3? We're note sure. But the tail risk here for the rest of retail is that one day everyone wakes up and realizes that 1+1 now = 5.
2) In looking through athletic apparel, it jumped out immediately that Nike has made a major push with performance apparel at Zappos. 710 out of the 7384 items on the site are Nike. That's just shy of 10%. Under Armour's share? 0%. That means one of three things -- either a) AMZN/Zappos is not buying UA bc customers don't want it, b) Nike's push into getting apparel right and getting it into Zappos as a new channel partner came with a 'no Under Armour' inclusion in the implied agreement, or c) UA has simply chosen to not go there yet. Sounds to us like it is the latter.
3) Similarly, looking at shoes, Nike has 459 of the 2910 shoes currently on the site. Under Armour? 0. Granted, UA is just starting its push into footwear, and Zappos is hardly in the relm of the aspirational retailers to showcase the brand as it launches. But the bottom line is this channel is there for the taking for the Armour.
This does not change our tune on UA (the stock)? No. Simply put, the 2-3 year opportunity is enormous, and this company will continue to print 20%-30%+ ORGANIC top line growth through 2012. But consensus estimates for next year have finally come up to our level, and two new risks have entered the equation -- a) a meaningfully upped ante chip for athlete endorsements, and b) cotton prices in the stratosphere at the same time UA is making a push into a new line of cotton-based product (ie it has never had a process around managing cotton risk, and this is a heck of a time to develop one).
Bottom line...We love the brand, really like the company and how it's progressed along its maturity curve, but we don't like the stock.