Nike vs. Under Armour Essay

The report focuses on the Economic Value Added of Nike Inc. The analysis is conducted through a detailed assessment of the financial statements including income statement, balance sheet, and cash flow. Such financial statements are then applied to derive common-size statements for income statement and balance. The trends and predictions obtained from the common-size statements predict the future economic value. Similarly, the Pro-forma financial statements derived provide vital future economic performances of Nike Inc. According to the regression analysis and the assessment of the common-size and Pro-forma financial statements; Nike Inc. has a growth in revenue and earnings per share. The EVA computed using WACC, Net Operating Profit after Taxes (NOPAT), and Invested Capital is positive (+$391.24); this shows that Nike Inc. is financially stable and will grow in the next three years.

Under Armour, Nike and Adidas are the top three brands known worldwide. These three companies were able to gain a strong brand to make a name for themselves in the sports apparel market today. On the other hand, Under Armour has become one of the top leading distributing companies to offer athletic apparel, footwear amongst many other things. “In 2013, Under Armour had a 14.7 percent share of the U.S market, compared quite favorably with Nike’s 27 percent market share and Adidas’s 7.4 percent market share.” (C-50) However, the company’s path of success can come crashing down as you take a look

Competitors in the industry can wreak havoc on the bottom line for a company. With rivals, a price competition usually ensues, which benefits the customers but hurts the competing businesses that share a common strategy. In reviewing rival sellers, many competitors exist within the sports apparel and footwear industry, but most of them are unable to compete with the industry giants, Nike and Adidas. They are well seated in the industry and their sales reveal this ultimate strength, however, Under Armour is putting pressure on these mammoths. In 2015, global sales of sports clothing and footwear equated to $250 billion, of which Nike grabbed $30.6 billion, Adidas held in its grasp $18.8 billion and Under Armour had a much smaller piece of the pie, at $3.9 billion globally. In reviewing these numbers, it looks like Under Armour is really subpar to the industry giants, but this is not exactly the case. Under Armour in the past couple of

Today Nike Inc is the largest manufacturer of sports footwear, apparel and equipment with worldwide revenue in excess of $25 billion in 2012 under various labels including Nike, Nike Golf, Converse and Hurley. Seventy percent of the company’s value is derived from footwear and apparel sold under the main brand Nike with Nike footwear commanding a market share

Under Armour has proven year over year that they are indeed a growth company. As their brand recognition and product availability increases so do their revenues. Under Armour achieved a growth in net revenue by over 18 percent, increased net income by 22 percent (suggesting financial discipline) all leading to their ability to sustain growth year over year (Under Armour 10K, 2009). This considerable increase in net revenue is attributed to an increase in apparel and the introduction of footwear in the first quarter of 2009 (2009). Although Under Armour has only been around 14 years they have only been traded publicly since 2005 (2009).

While Nike’ s gross margin was 43.1% and an operating margin was 11.8%, as well as Adidas generated gross margin 47.3% and an operating margin was 8.1% (Josh Kohn-Lindquist, 2013)

Under Armour has several large competitors; the largest being Nike, Adidas and Columbia Sportswear. These companies are similar in that they all stress product innovation, advertising and sponsorships. Adidas is broadly focused in all sporting categories but fails to stand out. Columbia is known almost solely by its winter gear, limiting its growth potential and creating strong seasonality trends. Nike strives to be the best in every segment while Under Armour’s goal is to be a leader in each process of its product development, concentrating on quality over quantity. An advantage for Under Armour is that it is focused more on improving its brand and unique products, licensing other items and accessories through independent manufacturers.

sponsors. Nike's market cap is $98 billion and Under Armours market cap is $22 billion. Nike

That's funny because I wasn't sure on which company to pick. I was between Nike or Under Armour. I'm a fan of both products but I went ahead with Nike due to having some Nike stocks and I wanted to see how the fiscal year ended. I'm happy that you did your report over Under Armour. This has sparked my interest in buying some stocks from Under Armour. I've noticed a big growth in marketing for Under Armour products and it looks like it could one day match Nike. For a young company Under Armour has some impressive numbers to back it up.

Nike and Adidas both have seniority over the new UnderArmour and have distributed their businesses in more countries. Nike and Adidas also have a more marketing advantage in advertising their products in mainstream movies, television, and even video games. The companies have more endorsements with athletes and famous non athletes. Nike and Adidas share a main goal of marketing to all types of consumers while introducing products for their side projects. People will always prefer name brand over lower prices and better quality. UnderArmour has a long way to go to keep up with these two companies. UnderArmour even has to face the threat of more small businesses trying to reach their levels of operating with lower

Under Armour’s Financial Performance. The most notable aspect of Under Armour’s financial performance during the 2011-2015 period was their rapid growth in net revenue. Growth in annual net revenue averaged between 24.6%-32.26% per year (Appendix B; C-77). They managed this while also maintaining their Gross Profit Margin annually at around 48%-49% (roughly similar range to The Adidas Group’s gross profit margins from 2013-2015); this can be indicated through Appendix A, which shows how Under Armour has managed to keep sales growth relative to cost of goods sold, which leaves them room to cover for their Operating Expenses (despite this however, Operating Profit margins did receive a small dip in 2015, but are more favorable than compared to the Adidas group’s operating margins in 2013-2015). New inventory management practices introduced in 2012 also allowed for Under Armour to decrease its Days of Inventory by about 11% in 2015 from 2011, thereby improving their inventory turnover. Under Armour was also benefitting from slightly above average Return on Equity between the 2011-2014 periods at an average of around 15.5%, before falling slightly below 14% in year-end 2015 (Appendix B;

In 2015, NIKE experienced an increase of cash and equivalents from $2.2 billion to $3.8 billion. Alternatively, Under Armour encountered a decrease in cash from $593 million to $129 million. Account receivables for NIKE decreased in 2015 from $3.3 billion to 3.4 billion in 2014. As for Under Armour, account receivable enhanced from to $279 million to $433 million in 2015, which was a result of higher sales accumulated by international consumers. Recent store opening increased NIKE’s inventory to $4.3 billion compared to Under Armour’s $783 million, which came from investments in replenishment products. Moreover, Under Armour registered total assets for 2015 were $ 2.8 million that resulted in an asset turnover rate of 1.381. As a result, NIKE

Nike offers a wide range of shoe, apparel and equipment products, all of which are currently its top-selling product categories.

The cost to the retailer is approximately 35.50$ which includes in the Research and development ($0.25), promotion/advertising ($4.00), Sales/distribution/admin ($5.00) and Nike’s operating profit ($6.23). While the cost to the consumer is approximately $70.00 which includes Retailer’s rent ($9.00), personnel ($9.50), other ($7.00) and Retailer’s operating profit ($9.00) (Break Down of Nike’s cost (1995). In the first quarter of 2015, the revenues for Nike increased 15% from 7.4$ to $8.0billion and the revenues for Converse were $575 million. Gross margin elevated 46.6%. “The increase was primarily due to a shift in the product mix to higher margin products, higher average prices and continued growth in the high-margin DTC business, partially offset by higher product input costs.” Selling/administrative expense exceeded 21% reaching to $2.5 billion. Operating overhead expense increased 19% to $1.6 billion due to higher costs of the expanding DTC business and investments in operational infrastructure. Other expense (income), net was $3 million; primarily of foreign exchange losses. Net income increased 23% to $962 million, while diluted earnings per share increased 27% to $1.09, reflecting a 3% decline in

Under Armour faces many competitors besides Nike, like Adidas, Reebok, and Puma. While Under Armour makes exceptional products that are of similar quality, what makes Nike so much stronger of a company? A main problem identified was that Under Armour does not have much international revenue compared to its counterpart Nike, and Under Armour does not try to send a message with their clothes. They just want to sell them. In fact, according to 247wallst.com, Nike had an international revenue quarter of about $7 billion while Under Armour saw a quarterly revenue of $610 million.