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U.S. Sports Apparel War: Nike Vs. Under Armour

Benjamin Rains

Nike, Inc. NKE and Under Armour, Inc. UAA are the two largest U.S.-based athletic footwear and apparel companies. Both Nike and Under Armour sponsor some of the most recognizable names in American sports, but one of the companies has struggled mightily over the last two years.

Under Armour’s stock is down 0.94% after Tuesday morning trading to $18.87 per share and is currently a Zacks Rank #4 (SELL). Under Armour’s non-voting Class C shares, which now trade under UA, are down 0.51% to $17.47 per share. Nike’s stock is up 1.36% to $57.42 per share and is a Zacks Rank #3 (HOLD).

Now, let’s take a look at both companies, and how each is positioned for the future.

Basic Numbers & 2017 Outlook

Nike’s stock price rose Monday after a notable analyst upgrade for its next quarterly earnings report, which is set for March 21. The positive earnings report could help lift Nike’s shares, which fell roughly 6% year-over-year.

Fourth quarter revenues were up 6% to $8.2 billion. Nike’s full fiscal 2016 revenues were also up 6% to $32.4 billion.

Nike went public in 1980, and since then, it has steadily climbed. In early 2007, Nike’s stock was trading at roughly $17 per share. Now, ten years later, Nike sits at its current $57 per share mark. Nike’s stock was trading at roughly $66 per share in Nov. 2015.

Under Armour’s stock began 2017 trading at roughly $30 per share. In late Jan., the company reported less than impressive holiday 2016 sales and weak 2017 projections. Under Armour’s stock price dropped from nearly $29 per share on Jan. 30, to roughly $21.50 per share by Jan. 31.

The company’s fourth quarter 2016 revenues were $1.3 billion. Under Armour projects revenues to grow by roughly 12% to $5.4 billion in 2017. But that is far less than the 20% growth rate it had posted for 26 straight quarters. Under Armour is very dependenton its brick-and-mortar sales.

Under Armour went public in Nov. 2005, and doubled on its first day of trading. The company rose impressively over the next decade, and its stock price reached an all-time high of $49 per share in July 2015. Since then, Under Armour’s stock has plummeted.

The Big Names

Under Armour and Nike both have sponsorship deals with some of the biggest names in American professional sports. Under Armour famously stole Stephen Curry away from Nike, and signed Curry, the NBA’s reigning two-time MVP, in Sep. 2015 to a deal that will keep him with the company through 2024.

Curry’s “UA Curry 3” basketball shoes retail for $139.99. Curry's 2016 sneaker sales were projected to be $160 million, according to Morgan Stanley data. Based on those projections, Curry sold more signature shoes than anyone else in the NBA, with Nike’s NBA superstar LeBron James coming in second.

Under Armour also has major endorsement deals with some of the most prominent and successful athletes in the U.S. In Jan. 2015, the company resigned PGA Tour star Jordan Spieth to a 10-year contract. The company currently boasts a big list of star athletes, which include two of the NFL’s most well-known quarterbacks, Tom Brady and Cam Newton. MLB stars Bryce Harper and Clayton Kershaw are both Under Armour athletes. The greatest Olympian of all-time, Michael Phelps, also calls Under Armour home.

But while those names are impressive, football, baseball, golf and swimming generate less footwear buzz and sales.

Nike owns the basketball shoe market, including the NBA. According to Nick DePaula, NBA sneaker writer for Yahoo’s “The Vertical,” Nike sponsors over 74% of the NBA if you include Nike's Jordan Brand subsidiary. Nike controls over 90% of the U.S. basketball retail shoe market.

The LeBron James’ “XIV” basketball shoes retail for $175. Kevin Durant’s “Nike Zoom KD 9” basketball shoes retail for $150. Russell Westbrook, a Jordan Brand athlete, wears “Air Jordan XXXI,” which retail for $185.

League and Team Deals

Under Armour recently announced a 10-year deal to become the official on-field uniform provider of MLB, which begins in the 2020 season. The MLB deal is the first professional sports league deal for the Baltimore-based company, which could prove to be very important going forward.

Notre Dame and Under Armour partnered for a 10-year deal, which in 2014 was the most valuable shoe and apparel contract in college sports history. Two years later, Under Armour signed UCLA to the biggest shoe and apparel contract in NCAA history: 15-years, $280 million. Under Armour also recently signed the University of California to a massive 10-year contract.

Nike made a splash when it announced it would become the NBA’s new official jersey sponsor. The deal is reportedly worth roughly $1 billion and begins in the 2017-18 season. Nike also renewed its NFL contract through the 2019 season. The NFL is still far and away the most popular sport in the U.S.

Nike also has a major international presence. It competes for dominance against Adidas in the biggest professionalsoccer leagues across Europe. Under Armor currently sponsors the English Premier club Tottenham Hotspur F.C., who currently sit in second place in one of the most popular and lucrative sports leagues in the world. But Nike will take over outfitting the London-based club next season.

Looking Forward

Adidas AG ADDYY once again surpassed Under Armour as the number two athletic apparel and footwear maker in the U.S. Under Amour has been negatively affected by slowing U.S. retail sales, as 85% of its revenue comes from the North America market. Under Armour announced on Monday that former General Motors GM veteran Clay Dean would take over as its chief innovation officer.

Nike is currently pushing more and more innovative products. The company has also released a slew of new advertisement campaigns since the New Year that promote equality.

Under Amour will sponsor 12 teams at the 2017 NCAA Tournament, a new company record. Nike will have 40 teams wearing its shoes and jerseys during March Madness, while 15 schools will wear Adidas.

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Nike, Inc. (NKE): Free Stock Analysis Report
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Under Armour, Inc. (UAA): Free Stock Analysis Report
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