Nike Still At Summit Of Footwear Market But Adidas Making Gains

  • The American multinational corporation has managed to maintain its standing at the top of the footwear market last year.
  • However, one of Nike's fiercest rivals, Adidas, managed to recover some lost ground through an increase in company sales in January.
  • Nike stock has grown from strength to strength in the past five years, and this presents a strong case for continued growth going into the future.

Nike (NYSE:NKE) has been the leading brand within the sports apparel industry for a long time. Founded in the year 1964 by Bill Bowerman and Phil Knight, the company has grown to become one of the world’s biggest suppliers of athletic footwear and apparel. In addition to this, the firm is also recognised as one of the major manufacturers of sports equipment in the world. This is certainly no easy feat.

In 2014, the company brand alone was valued at an astonishing $19 billion, which stamped its name in the history books as the most valuable brand among sports businesses. More so, the company’s popularity is at staggering levels, as the company’s “Just Do It” slogan and “Swoosh” logo are widely recognised trademarks. The firm has also expanded its profile over the years through sponsoring many high-profile athletes and sports teams worldwide.

It is clear that Nike continues to succeed because of its dominant foothold on the sports apparel industry. This is regardless of whether one is considering Nike as an entire entity or just its performance on Wall Street. Nike simply dominates all. Once again, in the past year, the company was the leader in the US athletic footwear market.

In the fiscal 2015 income statement review, revenues for the company increased by 10% to $30.6 billion, and up 14% on a currency-neutral basis. Additionally, Nike’s net income rose by 22% to $3.3 billion. This reflected strong revenue growth and gross margin expansion, with the latter expanding 120 basis points to 46%. Even more importantly, diluted earnings per share for the year increased by 25% to $3.70.

On the other hand, Adidas (OTC:ADDYY) continues to nip at Nike’s heels. Long known as Nike’s fiercest adversary in the sporting industry, the German multinational corporation is currently the largest sportswear manufacturer in Europe, and the second-largest in the world. According to statistics, the company appears to have thrived in the recently concluded month of January.

Nike is said to have experienced a decline in its athletic shoe sales in January, whilst both Adidas and Under Armour (NYSE:UA) managed to pull off double-digit gains. In the week ended January 30th, Nike’s sales dropped by 9.1% from a year earlier, whereas Adidas (which owns Reebok) achieved a 24.2% increase. Going forward, Adidas will attempt to better this performance.

In an attempt to spur revenue growth in 2016, the company has increased its marketing investments. Most notably, the firm agreed a £750 million deal with Manchester United (NYSE:MANU) to oust Nike as the football team’s kit provider. Besides this, Adidas has attempted to enhance its appeal in North American sports through the signing of top National Football League (NFL) players, as well as celebrities such as Kanye West.

Nike certainly doesn’t receive as much attention as companies such as Tesla and Apple, but Nike's stock performs at a consistently high level. Over the last five years, Nike’s stock price has gradually risen from levels of $21 per share to present levels of approximately $57 per share. This is illustrated in the diagram below.

Source: NASDAQ

Matt Powell, who is the Vice President and a sports industry analyst for the NPD group, stated:

“I expect to see the positive momentum we saw from athletic footwear throughout 2015 continue in 2016. The athleisure trend has helped the acceleration of growth, as has social fitness, which will continue to shape the sports business as class-based fitness activities and other shared experiences will dominate the industry.”

In conclusion, Nike’s stock has consistently continued to climb the imaginary ladder. It is for this reason that one can expect the company to continue its dominance in 2016 and for the years to come. In my opinion, Nike stock is definitely a buy.

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