David vs Goliath: How Does Under Armour’s Growth Over Recent Years Compare With Nike’s?

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Nike (NYSE:NKE) is the largest footwear company in the world while Under Armour (NYSE:UA) is one of the fastest emerging companies in the apparel industry. Although there is huge difference between the scale of the two companies, they have a similar business model and compete directly with each other to capture the same customer base. A key similarity between the two companies is the way that they been able to carve out a niche for themselves in the Athleisure market. Trefis captures trends in key operating metrics for Nike vs. Under Armour in an interactive dashboard, highlighting how UA has established its foothold in the fiercely competitive apparel industry. Additionally, you can find more Trefis Textiles, Apparel and Luxury Good Industry Data here

Nike’s revenues are 7x Under Armour’s, but they have similar revenue streams

  • Nike is much bigger than Under Armour. Nike’s total revenue in 2018 stood at $39 billion – almost 7.5 times Under Armour’s $5.2 billion.
  • This growth has been led by the apparel and footwear segments which have achieved robust growth in the last couple of years driven by global trends such as increasing penetration of sportswear, rising sports participation rate, and increasing health awareness.
  • Moreover, both companies changed their strategies in a timely manner to accommodate a variety of activewear products in their offerings.

Nike’s revenue growth since 2015 has averaged 6.5%, as opposed to growth in excess of 9% for Under Armour

  • Although, Nike has added roughly 6 times more to its top line compared to Under Armour since 2015, Under Armour’s growth has come at a much faster rate than Nike.
  • Nike has added roughly $6.7 billion to total revenue since 2015, increasing at an average annual rate of 6.5%. On the other hand, Under Armour has been able to add roughly $1.3 billion to total revenues, growing at a much faster rate of 9.4%.
  • Under Armour’s growth has been led by its footwear segment which has grown at an average annual rate of 16.2% thanks to the success of its running and basketball offerings, and the expansion of its footwear offerings internationally
  • Notably, both companies have continued to outperform the industry. Athleisure has continued to a be a strong driver for these companies, led by higher demand for clothing that can be worn to the gym as well as casually. Acceptance of casual dressing at the work place has also been a factor spurring growth.
  • With rising awareness of problems associated with obesity and diabetes, demand for fitness activities is likely to increase. This should provide a further boost to the demand for these companies activewear products.
  • Moreover, global e-commerce business has been the fastest growing business for the companies, with both of them achieving high double-digit growth in their digital business in 2018.

Comparing Footwear Revenues:

  • There is a huge gap between Nike’s footwear and Under Armour’s footwear revenues. As of 2018, Nike’s footwear revenue of $24.2 billion was roughly 23 times more than that of Under Armour’s $1.06 billionUnder Armour’s footwear segment has added $385 million to Under Armour’s revenues since 2015, growing at an average annual rate of 16.2%. while Nike’s footwear segment added $4.3 billion at an average rate of 6.8%.
  • As of 2018, contribution of footwear to Nike’s total revenue was 62% while Under Armour’s footwear business was contributing roughly one-third of the company’s revenues

Comparing Apparel Revenues:

  • Under Armour apparel has added $660 million to total revenues since 2015, growing at an average annual rate of 7.3% while Nike’s apparel segment added $2.5 billion at an average rate of 8.4%.
  • As of 2018, contribution of apparel to Nike’s total revenue was 30% while Under Armour’s apparel accounted for more than two-third of the company’s total revenues.

Under Armour’s strong growth over recent years can be attributed at least partially to its increased marketing spend

  • Under Armour has been aggressive in marketing its products over recent year. As of 2018, Under Armour’s marketing expenditure stood at $543 million – representing 10.5% of total revenues.
  • On the other hand, Nike’s marketing expenditure of $3.8 billion was much higher than of UA but represented less than 10% of Nike’s total revenues

 

How does Nike fare against Under Armour in terms of profitability and other key metrics like market capitalization and P/E Ratio? Trefis details trends in these metrics in the interactive dashboard.

 

Conclusion: Nike has a larger scale and better profitability but UA is establishing its foothold in the apparel industry

  • Nike has larger scale and better profitability than UA, but the latter seems to be gaining ground in the apparel market over the last few years – as evident from Under Armour’s strong revenue growth and aggressive marketing expenditure.
  • Although Under Armour’s growth has been sluggish since 2017, the company’s five-year restructuring plan is expected to provide a boost to the company’s growth in the long term.
  • Moreover, through active marketing and introductions to newer markets, both Nike and UA have increased their focus on the women’s segment. This has helped these companies to achieve steady growth.
  • Nike and Under Armour have achieved steady growth in their business, particularly footwear, in the past few years and we expect this trend to continue for the foreseeable future.

 

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