| Adidas vs. Nike vs. Under Armour | ||||
|---|---|---|---|---|
| Price | Market Cap | 1-Year Total Returns | P/E Ratio | |
| Adidas AG(ADDYY) | $140.00 | $54.6 B | -16.5% | 27.8 |
| Nike Inc. (NKE) | $165.39 | $261.8 B | 22.3% | 43.9 |
| Under Armour Inc. (UAA) | $22.25 | $10.6 B | 31.6% | 23.7 |
Source: YCharts as of Dec. 13, 2021
:max_bytes(150000):strip_icc()/AdidasvNikeVUAAChartthrough12-13-21-4355f9a652254805995585d175ea0f4f.png "Adidas vs. Nike vs. Under Armour: Stocks Compared (1)")
Adidas AG (ADDYY)
In late October 2022, Adidas terminated its partnership with Ye, formerly known as Kanye West, over the rapper's anti-Semitic remarks. Adidas and Ye had partnered for nearly a decade to produce the popular Yeezy line of products. The company's decision came after Ye had publicly stated that he could make anti-Semitic comments and that "Adidas can't drop me." In the nine days following this remark, Adidas faced mounting pressure from customers, legal organizations, and anti-racist groups to cut ties with the rapper.
Adidas said that its decision to cancel its partnership with Ye would lead to an expected negative impact to net income for 2022 of up to €250 million (about $264 million). The deal with Ye is estimated to have generated $697 million a year for Adidas. Despite dropping the partnership with Ye, Adidas asserted that it is the sole owner of all design rights to existing Yeezy products, leaving the possibility open that it will continue to develop the product line independently.
A decline in income due to the cancellation of the Ye partnership is one of several headwinds Adidas has faced. The company said in its Q3 2022 fiscal report that consumer demand in Western markets has slowed amid inflation. COVID-19 restrictions in China, in place much longer than in many other markets, depressed business. Product takebacks in China more than offset a 7% increase in retail revenues, leading to a revenue decline of 27% for Adidas' Chinese business in Q3.
Still, Adidas has said it expects strong improvement to net income in 2023. The company has posted double-digit growth in its ecommerce business across EMEA, North American, and Latin American markets. And Adidas is likely to get a boost to its Football segment revenue from the FIFA World Cup in late 2022 which could be felt into the new year.
Nike Inc. (NKE)
The pandemic drove Nike to accelerate its pivot toward its ecommerce channels. Nike had already been investing in its online direct-to-consumer business prior to the pandemic. As a result, the company was in a stronger position than many rivals to ramp up ecommerce sales when the pandemic began. This has been reflected in results. For the company's Q2 FY 2023, ended Nov. 30, 2022, it reported a 25% year-over-year improvement in digital sales for its Nike brand. This helped to drive overall reported revenue growth of 17% for the quarter, or 28% on a currency-neutral basis.
Nike's performance in the most recent quarter surpassed expectations. Although net income was flat YOY, it was much better than the anticipated 23% decline in this area that analysts had forecast. The company also increased its guidance for full FY 2023 and now expects revenue to climb more than 10% on a currency-neutral basis. The company's stock bumped nearly 13% following its earnings release.
Nike's digital offerings surpass those of many competitors. The company has explored the metaverse by launching a virtual space called Nikeland with Roblox, in which users can buy virtual Nike products. Late in 2022, the company launched .SWOOSH, another virtual marketplace which will allow users to design sneakers along with Nike staff and potentially provide royalty cuts for members. And the company has recently opened its first Rise concept store in North America. Rise is a hybridized in-person and digital experience providing online-to-offline services and virtual platforms.
Though there is much fueling Nike's recent growth, the company also faces numerous challenges. Like many retailers, Nike has wrestled with inventory back-up as a result of broader supply chain and shipping concerns. Similar to Adidas, Nike has also seen sales struggle in Greater China, with YOY declines in apparel and equipment revenue for the region.
Under Armour Inc. (UA)
The pandemic also hurt Under Amour in 2020, with its annual revenue declining 15%. Like Adidas and Nike, the company's ecommerce sales helped to mitigate the impact of store closures. Under Armour's ecommerce sales grew 40% during the year. Its fourth-quarter EPS exceeded analysts' estimates by 300.0%.
Growth has decelerated in the company's ecommerce area. For Under Armour's Q2 FY 2023 ended Sept. 30, the company said that ecommerce sales climbed by only 4%. In its earnings release for that period, Under Armour said it expects revenue to grow by a low-single-digit percentage rate for FY 2023, down from its earlier estimate of 5-7%.
Like Nike and Adidas, Under Armour has faced challenges associated with inflation and dampening retail sales. The company also disclosed in August 2022 that promotions on its athletic apparel had weakened its margins.
More recently, the company has dealt with leadership transitions as its founder Kevin Plank has said that growth has been slower than hoped for. Its top executive, Patrik Frisk, resigned unexpectedly in May 2022. Since that time, COO Colin Browne has been interim president and CEO of the company. In late December 2022, it was announced that Under Armour had tapped Stephanie Linnartz, most recently president of Marriott International, to be its next leader effective late February. Linnartz is seen as a digital leader, and her appointment may suggest that Under Armour will continue to focus on building its ecommerce business.
Which company is better: Adidas, Nike, or Under Armour?
Adidas, Nike, and Under Armour are all athletic apparel companies, meaning that they all face similar challenges. Inflation, the ongoing impact of the pandemic in China, supply chain constraints, and other broad economic trends have threatened each of these companies. But they have reacted in different ways, with Nike moving more toward digital experiences and offerings than either of the other firms. Still, each company is different and has a distinct portfolio of products, partnerships, and strengths.
What is the Number 1 Athletic Brand?
There are many ways to measure athletic brands, but among the three companies under consideration here, Nike is by far the largest. As of Jan. 6, 2023, it has a market capitalization of over $194 billion, while Adidas and Under Armour have market caps of about $25 billion and $5 billion, respectively.
What happened with Adidas and Kanye West?
In October 2022, Adidas announced its decision to sever ties with Kanye West, the rapper now known as Ye, over anti-Semitic remarks he had made. While Adidas retains rights to develop and sell Yeezy products from its former partnership, the move could cost the company hundreds of millions of dollars, as well as negative publicity.
The Bottom Line
Adidas, Nike, and Under Armour have seen their business operations rebound from a pandemic shock. All three have since dramatically expanded their ecommerce sales and continue to recover despite major supply chain disruptions, weakening retail due to inflation, and other macroeconomic concerns. In the case of Adidas, recent negative associations with one-time collaborator Ye may impact consumer or investor opinion of the brand, and severing ties with the rapper could cost the company hundreds of millions. Nike has seen some success in building out its virtual offerings, including expanding into the metaverse. And Under Armour is in the midst of the multi-month leadership transition which could see the company redouble its digital efforts as well.
