Adidas vs. Nike vs. Under Armour: An Overview
Adidas AG, Nike Inc. (NYSE: NKE), and Under Armour Inc. (NYSE: 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?
- Athletic apparel is a large and growing segment of retail in the United States and around the world.
- Adidas, Nike, and Under Armour are all in competition with one another to capture market share in this lucrative space.
- Despite the company's stability, size, and growth, investors might want to steer clear of investing in Nike for 2019.
- While Adidas is also a mature apparel company, the pricing for 2019 appears attractive.
- Under Armour is a pure growth play for 2019 and beyond.
Adidas is headquartered in Herzogenaurach, Germany, and trades as an American depositary receipt (ADR) in the United States. As an ADR, Adidas makes it easier for U.S. investors to buy the company's stock. The company boasts a market capitalization approaching $49.4 billion as of April 2019 and trailing 12-month revenues of $25.9 billion for December 2018. The stock in April 2019 was $124 per share and with a price-to-earnings (P/E) ratio of just over 25. The company yielded a dividend of around 1.5%.
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 also owns two other widely recognized names in athletics: Reebok and TaylorMade. 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 expects to increase its top-line revenue by 15% annually through 2020. It plans to create this growth through investments intended to increase the speed of new products to 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 is the largest company of the three and perhaps the one with the most brand recognition. Headquartered in Beaverton, Oregon, Nike has a market capitalization of around $132.6 billion and trailing 12-month sales of more than $38.7 billion as of the end of February 2019. Nike's share price was $84 as of March 2019, and its P/E ratio was 32.9. Dividends were yielding 1%.
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 public perceptions of 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 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 $8.54 billion and trailing 12-month revenues of $5.19 billion as of December 2018. At the beginning of April 2019, the stock was trading at around $21 per share with a P/E ratio of approximately 81. As a younger growth-phase company, the stock does not currently pay a dividend.
Under Armour's revenue and net income growth since its initial public offering (IPO) has 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. 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's size, 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.
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.
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 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. Under Armour has also acquired several fitness app companies as it seeks to integrate mobile technologies to bolster its brand.
Who 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 2019. Nike is a mature company, and its stock is hitting all-time highs. 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 for 2019 appears attractive. Its P/E ratio is much more reasonable, 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 2019.
Under Armour is a pure growth play for 2019 and beyond. The company appears to be investing in key areas that will bolster the brand in years to come. Although it would have been great to be a buyer several years ago, this stock still has significant room for growth in its share price.