Sportswear brands have enjoyed strong growth in recent years due to western consumers being more conscious about their body image. At the forefront of this growth is Nike (NYSE:NKE) and Under Armour (NYSE:UA).
Nike is a company steeped in history. Its Air Jordan range is a right of passage for young urban youth, and it is so desirable that people are willing to commit criminal acts in order to have it in their wardrobe. Plus, with huge advertising, Nike has great brand recognition.
On the other hand, there is Under Armour: a comparatively new kid on the block gunning to be number one. With Under Armour stock outperforming Nike stock year to date, the threat to Nike is real and growing.
Source:Nike Stock Price Data by amigobulls.com
In order to analyze which one is a better buy option, it is vital to compare them on some key elements.
Nike Vs Under Armour : Financial Analysis
In order to put the financials of these two companies into context, it is worth noting that Under Armour’s IPO was in 2006, compared to Nike’s in 1980.
Under Armour’s earnings have grown at 3.28 times the rate of Nike earnings over the past five years. This can be attributed to the fact that Under Armour has been on a spree of signing successful sports people to sponsorship deals and using them as leverage to sell product. Nike works on a similar marketing strategy; however Under Armour has been trying to beat Nike to the signature.
For instance, Under Armour signed Stephen Curry to a shoe deal in 2012 for $4,000,000. Stephen Curry went on to win a Championship and was crowned an MVP. As a result, an Under Armour branded trainer “The Curry One” went on to net Under Armour $158,000,000 in just 3 months.
This strategy of “getting them early and cheap” then cashing in on them when they are performing well is working well.
Additionally, Under Armour’s five year growth rate stands at 29.2% compared to Nike’s 10%. This encapsulates the momentum surrounding Under Armour as a brand. Perhaps, consumers are so used to Nike that there is a sentiment to want something different.
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