Adidas vs. Nike vs.

Under Armour: An Overview

Adidas AG, Nike Inc. (NKE), and Under Armour Inc. (UA) are the three largest
retailers in the competitive athletic apparel industry. They're ubiquitously worn
in a variety of sports leagues, including the NBA. Each company has carved
out an impressive market share in a growing and increasingly innovative
industry. Which company will stand out, and what are the key differences—
and similarities—between three well-known brands?

Adidas
Adidas (ADDYY) is headquartered in Herzogenaurach, Germany, and trades
as an American depositary receipt (ADR) in the United States. That makes it
easier for U.S. investors to buy the stock of this foreign company.

The company boasted a market capitalization approaching $63 billion as of

early November 2020. The ADR was priced at $163 per share with a price-to-
earnings (P/E) ratio of over 36 and a trailing annual dividend yield of 1.93%.1

Star Connections
Adidas has a more established market in European countries. They have a
lifetime sponsorship with Lionel Messi, one of the highest-paid soccer players.

The Adidas Group owns two other widely recognized names in athletics:
Reebok and TaylorMade. In late 2020, it was reported that Adidas was
considering selling the Reebok brand.

Looking Ahead
While Adidas was initially known as a soccer brand, its ownership of these
other brand names establishes it as a diversified player in athletic apparel and
goods.

Adidas plans to create growth through investments intended to increase the

speed of new products to the market and allow the company to adapt more
quickly to market demand. The company also intends to invest strategically in
marketing to growing urban populations across the globe.

Nike
Nike is the largest of the three companies and perhaps the one with the
best brand recognition. Headquartered in Beaverton, Oregon, Nike has a
market capitalization of around $203 billion as of early November 2020. Nike's
share price was above $129, and its P/E ratio was 76.79. Dividends were
yielding 0.79%.2

The Dominant Player

Nike is dominant across the globe. In particular, it maintains the largest market
share in the athletic apparel industry in North America. The company has
made significant efforts in recent years to repair negative perceptions about its
labor practices in emerging markets.

Nike markets most of its products under the Nike name, but it also owns
smaller niche brands such as Jordan and Converse. The company intends to
significantly increase its direct sales and e-commerce revenues in developed
markets. The company also sees significant growth opportunities in China and
in its women-focused product lines.

Under Armour
Under Armour is by far the youngest of the three stocks, having gone public in
2005. While the company's growth during the past 10 years has been
remarkable, it is the smallest of the three companies.

Under Armour has a market capitalization of around $6.36 billion as of early

November 2020. The stock was trading at around $14 per share. As a
younger growth-phase company, the stock does not currently pay a dividend.3

2021 Expectations
At this writing, Under Armour is winding up a tough 2020. It expects only
modest growth in earnings per share in 2021 after a full-year revenue decline
for 2020 that was expected to be in the high teens.

Under Armour's revenue and net income growth since its initial public offering
(IPO) had been exponential, rewarding early investors with significant share
price growth. Starting out with a niche in the American football market,
famously selling moisture-wicking base layers, the company has consistently
found ways to innovate products that penetrate mature markets.

Going for Youthful Buyers

It tends to appeal to younger market segments, and it often prices its products
at a premium for its perceived quality of innovative materials and designs.

Compared to Nike, Under Armour appears to have substantial room to grow.

Under Armour projects substantial growth in footwear sales and additional
income streams from more sales directly to consumers.

The company will also continue to enter new markets, most recently hiring a
talented team to initiate a plan to enter the outdoor performance apparel
market. The expectations are set high, but recent history would say not to bet
against Under Armour's success.

Competitive Dynamics
Nike is the giant in the industry and perhaps has the most to lose. The
company's growth projections continue to be aggressive.
Competitors like Under Armour will continue to innovate to attempt to steal
market share away from Nike, and the younger generation of buyers may
show signs of favoring smaller brands and more transparently-sourced goods
that they can obtain easily through online shopping.

At Nike's Heels
Adidas is entrenched in market segments domestically and abroad where it
has significant brand loyalty relative to its competition. However, the company
does not boast quite the same level of high-end sponsored athletes, which
could harm its perceived value compared to the other two companies.

Under Armour will no doubt be on the attack in years to come. It has paid top
dollar for a promotional lineup of world-class athletes across all major sports,
which should continue to feed its perception of having some of the highest-
performance, most current, and most innovative apparel products.

Its performance has been lousy in 2020, but by the end of the year, it reported
slightly less lousy numbers, thanks to high sales of its home workout gear.

Under Armour has also acquired several fitness app companies as it seeks to
integrate mobile technologies to bolster its brand.

Which to Buy and Hold in 2019

Despite the company's stability, size, and growth, investors might want to
steer clear of investing in Nike for now. Nike is a mature company, and its
stock has been on a roll, nearly doubling its price since the beginning of 2018.
Those stock prices would seem to reflect its aggressive growth goals. If any of
those goals waver, a stock price correction is sure to follow.

While Adidas is also a mature apparel company, the pricing appears attractive
if it starts delivering growth in 2021, and it pays a better dividend than Nike.
Adidas is unlikely to experience exponential share price growth, but at
its current price, it appears to be a sound investment for 2021.

Under Armour is a pure growth play for 2019 and beyond. As such, it is not
without risks. The company appears to be investing in key areas that will
bolster the brand in years to come.
David vs Goliath: How Does Under
Armour’s Growth Over Recent Years
Compare With Nike’s?
Nike is the largest footwear company in the world while Under Armour is
one of the fastest emerging companies in the apparel industry. Although
there is huge difference between the scale of the two companies, they have a
similar business model and compete directly with each other to capture the
same customer base. A key similarity between the two companies is the way
that they been able to carve out a niche for themselves in the Athleisure
market. Trefis captures trends in key operating metrics for Nike vs.
Under Armour in an interactive dashboard, highlighting how UA has
established its foothold in the fiercely competitive apparel industry.
Additionally, you can find more Trefis Textiles, Apparel and Luxury Good
Industry Data here

Nike’s revenues are 7x Under Armour’s, but they have similar

revenue streams

 Nike is much bigger than Under Armour. Nike’s total revenue

in 2018 stood at $39 billion – almost 7.5 times Under Armour’s
$5.2 billion.

 This growth has been led by the apparel and footwear segments
which have achieved robust growth in the last couple of years
driven by global trends such as increasing penetration of
sportswear, rising sports participation rate, and increasing
health awareness.

 Moreover, both companies changed their strategies in a timely

manner to accommodate a variety of activewear products in
their offerings.
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Nike’s revenue growth since 2015 has averaged 6.5%, as opposed

to growth in excess of 9% for Under Armour

 Although, Nike has added roughly 6 times more to its top line
compared to Under Armour since 2015, Under Armour’s
growth has come at a much faster rate than Nike.

 Nike has added roughly $6.7 billion to total revenue since 2015,
increasing at an average annual rate of 6.5%. On the other
hand, Under Armour has been able to add roughly $1.3 billion
to total revenues, growing at a much faster rate of 9.4%.

 Under Armour’s growth has been led by its footwear segment

which has grown at an average annual rate of 16.2% thanks to
the success of its running and basketball offerings, and the
expansion of its footwear offerings internationally

 Notably, both companies have continued to outperform the

industry. Athleisure has continued to a be a strong driver for
these companies, led by higher demand for clothing that can be
worn to the gym as well as casually. Acceptance of casual
dressing at the work place has also been a factor spurring
growth.

 With rising awareness of problems associated with obesity and

diabetes, demand for fitness activities is likely to increase. This
should provide a further boost to the demand for these
companies activewear products.
  Moreover, global e-commerce business has been the fastest
growing business for the companies, with both of them
achieving high double-digit growth in their digital business in
2018.

Comparing Footwear Revenues:

 There is a huge gap between Nike’s footwear and Under

Armour’s footwear revenues. As of 2018, Nike’s footwear
revenue of $24.2 billion was roughly 23 times more than that of
Under Armour’s $1.06 billion. Under Armour’s footwear
segment has added $385 million to Under Armour’s
revenues since 2015, growing at an average annual rate of
16.2%. while Nike’s footwear segment added $4.3 billion at an
average rate of 6.8%.

 As of 2018, contribution of footwear to Nike’s total revenue was

62% while Under Armour’s footwear business was contributing
roughly one-third of the company’s revenues

Comparing Apparel Revenues:

 Under Armour apparel has added $660 million to total

revenues since 2015, growing at an average annual rate of 7.3%
while Nike’s apparel segment added $2.5 billion at an average
rate of 8.4%.

 As of 2018, contribution of apparel to Nike’s total revenue was

30% while Under Armour’s apparel accounted for more than
two-third of the company’s total revenues.

Under Armour’s strong growth over recent years can be

attributed at least partially to its increased marketing spend

 Under Armour has been aggressive in marketing its products

over recent year. As of 2018, Under Armour’s marketing
expenditure stood at $543 million – representing 10.5% of total
revenues.

 On the other hand, Nike’s marketing expenditure of $3.8

billion was much higher than of UA but represented less than
10% of Nike’s total revenues

 
How does Nike fare against Under Armour in terms of
profitability and other key metrics like market capitalization and
P/E Ratio? Trefis details trends in these metrics in the interactive
dashboard.

Conclusion: Nike has a larger scale and better profitability but

UA is establishing its foothold in the apparel industry

 Nike has larger scale and better profitability than UA, but the
latter seems to be gaining ground in the apparel market over
the last few years – as evident from Under Armour’s strong
revenue growth and aggressive marketing expenditure.

 Although Under Armour’s growth has been sluggish since 2017,

the company’s five-year restructuring plan is expected to
provide a boost to the company’s growth in the long term.

 Moreover, through active marketing and introductions to

newer markets, both Nike and UA have increased their focus on
the women’s segment. This has helped these companies to
achieve steady growth.

 Nike and Under Armour have achieved steady growth in their

business, particularly footwear, in the past few years and we
expect this trend to continue for the foreseeable future.