The three biggest retailers in the competitive athletic apparel industry are Adidas AG, Nike Inc. (NKE), and Under Armour Inc. (UA). They're in a variety of sports leagues, including the NBA. Each company has carved out a sizable market share in a rapidly expanding and increasingly innovative industry. I am sure you have worn one of Under Armour’s t-shirts, Nike’s shoes and Adidas’ athleisure wear. Which company will shine the brightest, and what are the key differences—and similarities—between three well-known brands?
Under Armour, which went public in 2005, is the youngest of the three stocks. While the company's growth over the last decade has been remarkable, it is the smallest of the three.
As of early November 2020, Under Armour had a market capitalization of around $6.36 billion. The stock was trading at around $14 per share at the time. It does not currently pay a dividend because it is in its early stages of growth.
Since its initial public offering (IPO), Under Armour's revenue and net income growth has been exponential, rewarding early investors with significant share price growth. Beginning with a niche in the American football market, famously selling moisture-wicking base layers, the company has consistently found ways to innovate products that enter mature markets.
It caters to younger market segments and frequently charges a premium for the perceived quality of innovative materials and designs.
Under Armour has lagged behind larger rivals Nike and Adidas in recent years, failing to respond quickly enough to the hot athleisure trend in the United States. But it is hoping that the growing sports business in Asia and an expanding middle class will jumpstart its growth.
In comparison to Nike, Under Armour appears to have a lot of room to grow. Under Armour anticipates significant growth in footwear sales and additional revenue streams from increased direct-to-consumer sales.
The company will also continue to expand into new markets, most recently hiring a talented team to launch an entry strategy into the outdoor performance apparel market. The stakes are high, but recent history suggests that betting against Under Armour's success is a bad idea.
Nike is the industry's behemoth, and it stands to lose the most. The company's growth projections remain aggressive.
Competitors such as Under Armour will continue to innovate to steal market share from Nike. The younger buyers may favor smaller brands and more transparently sourced goods that they can effortlessly obtain through online shopping.
Adidas is entrenched in market segments both domestically and internationally, where it has significant brand loyalty compared to its competitors. However, the company does not have the same level of high-end sponsored athletes as the other two companies, which reduces its perceived value.
Under Armour will undoubtedly be on the offensive in the coming years. It has paid top dollar for a promotional lineup of world-class athletes from all major sports, which should feed its perception of having some of the most high-performance, current, and innovative apparel products.
Taiwan is one example of its Asian aspirations. A sign at the entrance to one of its two-story flagship stores in Taipei encouraged customers to download its MapMyRun digital fitness app as part of its effort to build a global fitness community and better study customer behaviour for more personalised products and pitches. A discount on Under Armour's new Hovr running shoes is offered to entice customers to download the app. Inside, "sportstyle," the store's response to the fashion-focused athleisure trend, can be found alongside more performance-oriented categories like running and training.
To be sure, Under Armour still has a long way to go to catch up to its competitors. Nike and Adidas, for example, have long been present in the region and are among the major Western brands eager to expand their market share. They are among the major Western brands that can frequently be seen on the streets of Taipei instead of Under Armour. Labels such as Lululemon, which have benefited from the athleisure trend, are eager to capitalise on the growing market demand.
Pictures of celebrity endorsers such as NBA star Stephen Curry, golfer Jordan Spieth, and actor Dwayne Johnson adorned the walls throughout the Under Armour store. Animated 3D images of Curry and others such as ballet dancer Misty Copeland could be found near the kids' and women's sections. Another highlight was a wall displaying Curry's signature shoes.
According to the company's local e-commerce website, the store is one of about 60 Under Armour selling locations in Taiwan, including full-priced retail stores, discount outlets, and shops within shops inside department stores.
Under Armour currently has approximately 700 mono-branded company-owned or partner-run retail locations in Asia, with plans to increase that number to about 1,900 by 2023, according to the company's investor conference in December. According to the report, the region has a $32 billion addressable market aimed at the "focused consumer." However, if less serious sports fans are included, the total sportswear market in the region is estimated to be $125 billion. In comparison, according to market research data, the North American athletic shoe and apparel market is worth $95 billion.
"We are generally just getting started in the (Asia Pacific) region," Under Armour's managing director for the region, Jason Archer, said in December. "Even though we have over 1,300 distribution points across APAC, we are still a new market entrant in most channels. We're very excited about the Asia Pacific runway ahead of us."
Under Armour's quarterly earnings were released last week, and while revenue in its top North American market fell 6% to $965 million, overseas sales increased 24 percent to $395 million. European revenue increased by 32%, while revenue in Asia increased by 35% and would have increased by 39% if currency effects were excluded.
In July, Under Armour named new managing directors for its various international regions and announced that its Hong Kong office would be expanded to serve as its Asia headquarters.
According to the most recent earnings reports from Under Armour, overseas sales account for approximately 28 percent of Under Armour's revenue. Nike reported three-fifths of overseas sales.
"We believe that we have an advantage in that (Asian) region right now because we're smaller," Under Armour's president and chief operating officer, Patrik Frisk, said on the company's earnings call earlier this month. Except that its more well-known and larger competitors in the region aren't standing still either.
Nowadays, customisable apparels are in trend as it showcases a one-of-a-kind apparel for consumers and that is what makes it worth it. The polo tee printing is especially on the rise due to its comfortable material and many companies print company polo shirts for their employees due to this reason. All three companies offer customised polo t-shirts, but who will take the lead with their branding? We shall see.
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