Skechers Is Growing Like A Weed, But Not At Nike’s Expense

  • Skechers has emerged as one of the fastest growing companies in the sports apparel industry.
  • The notion that the company could be stealing Nike's market share is unfounded.
  • Nike brands remains as popular as ever.
  • The company's unparalleled dedication to innovation will ensure it remains at the pinnacle for years to come.
Nike Stock a long term buy

The sports apparel industry has remained one of the most investable in the retail space, perhaps only rivalled by new restaurant IPOs. Investor interest in this space is being driven by strong growth as the world’s love affair with sports gear such as sneakers shows no signs of waning.

Skechers (NYSE: SKX) has emerged as a real Nike (NYSE: NKE) competitor due to the growing popularity of the brand. The company’s shares have also become a hot commodity due to its blistering growth. Skechers recently delivered a glowing Q2 2015 report where same-store sales grew 12.9% while overall revenue grew 34%. Under Armor (NYSE: UA) has been growing at a rapid clip too, with the company’s revenue up 29% during the last quarter. Nike is not exactly a growth company, but is still growing its revenue in double-digits despite its revenue base being more than five times bigger than the combined market shares of the two companies.

Nike and competitors by revenue size

Source: GL Investments

Shares of the three companies have outperformed the sector and the market in general: Skecher shares are up 180% YTD; Under Armor is up 45% while Nike is up 19% YTD.

Losing market share

There has been growing fears by Nike investors that the company could be gradually losing market share to Skechers and Under Armor due to their rapid growth. But these fears are not justified. From the revenue chart above, Nike has a much bigger revenue base than the two companies combined. This in effect means that the company’s low teens growth translates to better growth in dollar terms than the 30s percentage growth by its two competitors.

Skechers is the company most Nike investors fears because it poses a competitive threat to Nike’s footwear segment that contributes nearly 60% of its revenue.

Nike Revenue share by segment

Source: Market Realist

But again here these fears are unfounded. Nike is very dominant in the footwear market, owning 62% share of this market. Skechers in comparison owns just 5% of the footwear market. Nike’s revenue from the popular Converse brand was up 21% during the last quarter, which translates to much bigger growth in dollar terms compared to Skechers.

Sports Footwear market share by company


Though Nike does not break down revenue figures by geographical regions, the company said during its last earnings call that all its geographical segments were recording positive growth.

Adidas, not Nike, is losing market share

Both empirical and anecdotal evidence suggest that Adidas (OTC:ADDYY) could be losing market share to the likes of Skechers and Under Armor. Though the company has now started growing again after going through a rough patch in 2014, some of its brands have been recording negative growth. The company’s TaylorMade-adidas Golf fell 9% during the last quarter. Adidas recently lost its position as the #2 sports brand in the U.S., and this seems to be repeating in other markets.

A Citigroup Research survey done earlier this year revealed that 60% of European footwear retailers believed that Nike was actually gaining market share in Europe.

Nike Gaining market share in europe


Adidas brands, including Reebok which the company acquired in 2005, were seen as losing market share by 39% of the respondents for the survey compared to 10% for Nike’s Converse.

Brands gaining or losing market share


Nike has continued to dominate global markets due to the company’s unparalleled R&D efforts. Nike collects extensive user data when designing its shoes, and employs thousands of sales reps around the world to gather data that the company uses when designing its shoes.The company’s research labs employ podiatrists, biomechanics, pro-athletes, trainers, coaches, and psychologists. The company uses 3-D motion cameras in its labs that record every tiny detail such as how an athlete’s foot flexes when running while round sensors and force plates on the floor measure forces that impact an athlete’s foot during running. The company’s ability to accurately identify customer needs in each niche market allows its brands to become dominant.

Though Nike does not break out its R&D spend, the fact that it was awarded more than 500 patents in 2013 alone speaks volumes about its dedication to innovation.


There is no reason to believe that Nike could be losing market share to its much smaller rival, Skechers. The company is still growing at a healthy clip despite having a much bigger revenue base. The company’s dedication to innovation ensures that its brands remain evergreen. Nike Stock remains a good long-term investment.

Brian Wu Brian Wu   on Amigobulls :

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