Apparel maker Respect Your Universe (RYUN) describes itself as “a premium training apparel and equipment company rooted in and inspired by Mixed Martial Arts. Focused on the needs of the athlete, Respect Your Universe brings innovative design, development and production of premium training gear with style to mixed martial artists and athlete enthusiasts worldwide. The Respect Your Universe brand is based on respect, honor and sustainability.” While in its developmental stages, the company has put together an experienced management team and made clear its intent to develop and market high technology, environmentally responsible performance sportswear and related product.
 
From its start, Respect Your Universe built its line of product around the desires of athletes involved in the mixed martial arts movement. This sport, which before had no high end athletic wear dedicated specifically for it, has much going for it. It is growing at the same time as many established sports are shrinking in fan base. There is even a movement of sorts afoot to have mixed martial arts become part of the Olympics.
 
The roots of modern mixed martial arts go back to the original Olympic Games of ancient Greece. Simply, it was hand to hand combat, the only rules being no eye gouging or biting. Through various military and trading campaigns, facets of mixed martial arts spread throughout Europe and Asia, and along the way merged with fighting techniques that already existed in those parts of the world, such as karate and judo.
 
Eventually, the a Japanese national immersed in the mixed fighting styles came to Brazil in about 1910, and befriended a Scottish businessman named Gracie. The Japanese national agreed to give Japanese style JuJitsu lessons to Gracie’s son, Carlos Gracie. One of Carlos’ brothers, Helio, then pickup up the Asian technique, and tweaked that with Brazilian influences that truly became the antecedent for our current mixed martial arts sports. It was Helio’s son, Royce Gracie, who at 175 pounds became the first superstar of American Ultimate Fighting Championships (UFC) in the early 1990′s.
 
Royce’s older brother Ronion Gracie actually partnered with advertising executive Arthur Davie to create the UFC. Gracie meant it to introduce the United States as the antithesis to popular professional wrestling. There would be no choreography, nor showboating. This would be actual, real hand to hand fighting. Royce’s and Ronion’s confidence came from working for years before the UFC project in Brazil on the “Gracie Challenge”, during which one of the Gracie family would meet any challenger from any fighting discipline. Davie pitched the idea of a mixed fighting tournament to Semaphore Entertainment Group (SEG), and shortly thereafter, on November 12, 1993, the first Ultimate Fighting Championship took place in Denver. Royce Gracie won three of the first four UFC events, which was a tournament style event with winners advancing back in the day. It also had no weight classes, and often there would be discrepancies of 200 pounds or more between fighters. Eventually eight weight divisions were created, and fighters were no longer forced to fight multiple times in one day.
 
As we sit here today, the modern UFC was forged when Zuffa LLC acquired UFC in January, 2001. Advertising trended up as the sport became sanctioned by the Nevada licensing body. This year UFC’s have been, or will be held in various cities in the United States and Canada, Brazil, Japan, Sweden, Australia, Great Britain, and Macao. By the end of 2012, we will have had 154 UFC’s, It is the frequency and geographic diversity of UFC events that will, at least theoretically, bring more visibility to Respect Your Universe product line.
 
From its start, Respect Your Universe tied into this industry, seeking input into the designs of its articles from the athletes themselves. Taking a cue from Nike, from whom most of the management of Respect Your Universe came, the company has sought and achieved marketing and promotional tie ins with many of the sport’s best known stars, and has even reached successfully already outside the world of mixed martial arts to secure baseball’s Darnell McDonald, an outfielder in the Boston Red Sox organization. UFC stars Phil Heath and John Fitch are also known as Respect Your Universe athletes. Most recently, Bantamweight rising star TJ Dillashaw also came on board.  Many other UFC athletes help to promote Respect Your Universe gear by sporting its articles at UFC matches and conventions.
 
Among the hardest things for any developmental company to do is to transition from that stage into being a revenue and profit minded company. All of the current management is steeped in merging fashion, function, and profitability, and tying into the world’s environmental movement is a fine thing too to distinguish Respect Your Universe from any competition. I truly believe, with the stock currently trading for about $0.90 per share, this young company has the potential to be a long term winner.
 
Right now, the winner and champion of the athletic apparel business is Lululemon (LULU). One other perhaps better known company is actually looking pretty dismal right now, and that is Under Armour (UA).  The two companies had relatively similar gross margins for the twelve months ending March 31, 2012. But on the way to bottom line profits, something gets lost in the shuffle as the profit margin of Under Armour was just 6.44%. Lululemon’s was 17.9. Taking a snapshot of just the first quarter of 2012, Under Armour’s profit margin was a narrow, 3.8%. Meanwhile Lululemon first quarter 2012 profit margin was 16.5%. How did these companies diverge so much? Well for one thing, Lululemon has no debt, and Under Armour had about $64 million of debt and long term liabilities at the close of the first quarter. But the other thing is that while Under Armour chases athletes and holds high school all-star games, Lululemon focuses on its core business of providing top quality yoga performance and related fashion wear.
 
My hope for Respect Your Universe it does not become so busy chasing endorsements that it forgets its focus is to make product of such quality that it is distinct from any competitors’ apparel. That emphasis on quality fabrics and construction materials permeates Respect Your Universe’s retail website. As long as the company remains committed to its product, I am confident that product will meet the approval of not just Respect Your Universe target athletes, but fans and supporters as well.
 
Transparency/Disclosure: I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research. I am a consultant to a third-party and have received one hundred fifty dollars for independent research. Always discuss investments with a licensed professional advisor before making any financial decisions. Statements made herein are often “forward-looking statements” as stipulated under Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934, and the Private Securities Litigation Reform Act of 1995. While I have researched this company thoroughly, my due diligence is not a substitute for your own.