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The Tale Of The 2 Biggest Sportswear Brands

Both of these brands are staples of the athletic apparel industry. Their clothing is worn across a wide spectrum of major sports globally and they both have significant slices of market share in the industry.



However, one of these brands is on the up and the other is struggling through some serious problems: 


Nike Inc (NYSE: NKE) is a name synonymous with sports clothing and footwear. Revenues of $36.39 billion in 2018 generated $1.93 billion in net income for Nike. It has many brands that are trailblazers in their own right, such as Air Jordan, Air Max, and Converse. 


Under Armour Inc (NYSE: UAA) is a much newer entrant to the sportswear game. It was founded in 1996, originally focusing on sports compression garments before moving into general sportswear and footwear. The company had revenues of $5.2 billion in 2018 with net loss reaching just $46 million. 


Both companies have recently announced significant changes in leadership. Nike’s current CEO Mark Parker will be stepping down in January 2020, with the former CEO of eBay and ServiceNow John Donahoe set to take over. This change came as a surprise, with Nike stock dropping 3.4% following the announcement. 


The current CEO and founder of Under Armour Kevin Plank will also be stepping down in January 2020. He will be replaced by current COO Patrik Frisk. In contrast to Nike, the announcement of the changing of the guard at Under Armour led to its stock price increasing by over 5.8%. 


Nike is a lot bigger than Under Armour but they both have similar business models which have been vital for their success. There has been significant growth in recent years of both the footwear and apparel segments as a result of shifting trends. Some of these trends include increasing awareness of health, rising popularity for sportswear and increasing levels of sporting participation. Each company is innovative and adaptable to jump on the latest trends.

Nike is a lot bigger than Under Armour but they both have similar business models which have been vital for their success. There has been significant growth in recent years of both the footwear and apparel segments as a result of shifting trends. Some of these trends include increasing awareness of health, rising popularity for sportswear and increasing levels of sporting participation. Each company is innovative and adaptable to jump on the latest trends.


Nike’s great year vs Under Armour’s bad year

Both companies have been dealing with the declining interest in brick-and-mortar retail in the United States and the move to e-commerce. A number of major footwear and sporting goods retailers have been forced into bankruptcy in recent times. This is a bigger deal for Under Armour, as 76% of its revenues come from the United States market. Nike, on the other hand, has a much larger global presence, with only 40% of its revenue coming from the U.S. market. 


One of the big growth markets for Nike in 2018 and 2019 has been in China. In the company's most recent quarterly figures, its China revenue rose by 22%, up to $1.68 billion. This is even more impressive given the ongoing trade war between the U.S. and China. 


Once upon a time Under Armour was one of the fastest-growing apparel companies. However, over the past couple of years sales have been somewhat weak and the company has been restructuring. This restructuring cost the company roughly $183 million. 


Excess inventory has been a persistent problem for Under Armour over the past few years. As a result, the company has had to discount a lot of its products in order to shift them, which in turn has ruined brand perception amongst younger consumers.


Under Armour is also recently in hot water with the SEC over its accounting practices. The regulator is investigating to see if the company moved sales from one quarter to a different quarter in order to have its financial results appear better than what they are. 


If this proves to be the case, the company will face charges of misleading investors in relation to the company's financial position. There is an ongoing criminal and civil inquiry into the matter. After the news of this investigation went public on Nov 4, 2019, Under Armour’s share price plummeted by 20%.



Where can Under Armour go from here?

The future is unclear for Under Armour. The new CEO has a lot of work on his hands as the company deals with the fallout from the SEC investigation. Things could get a lot worse for Under Armour too if the findings from the SEC are not positive, and rumors of a ‘frat-house’ work environment will also need to be addressed.


One of the recent positives for the company was its deal with the space tourism startup — Virgin Galactic. As part of this project, Under Armour has produced a base layer, footwear, spacesuit, jacket and a training suit for these space tourists. With space tourism being reserved mainly for wealthy (and brave) individuals for the foreseeable future, Under Armour will have to wait a while if they are looking to capitalize on space apparel in a significant way. 


What has Nike been doing right?

Nike clearly is benefitting from having a much more global presence than Under Armour. It will continue to see success globally as it enters major markets such as China. 


The company is also always innovating and not settling for what it has. One of its most exciting projects is its subscription-based business. Nike is looking to create a model whereby recurring revenues can be built into its business model going forward. It has two main subscription-based business streams in operation. The Nike Adventure Club and Nike Training Club service have seen promising results to date.


Subscription services are becoming more and more popular and Nike clearly sees the potential that is there. No longer will it just focus on one-off sales, it can now generate recurring revenue from the same customers for the same product.


MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Nike and Under Armour. Read our full disclosure policy here.

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