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Football season is right around the corner and you can expect athletic apparel stocks to benefit --- the question is, who will lead the way? Most people will assume Nike (NKE) --- a safe assumption given the company's wide spectrum of offerings, ranging from apparel to shoes. That said, I don't think that we can overlook NKE's competitor Under Armour (UA). For those not familiar with the company, UA makes performance athletic wear, ranging from underwear to camouflage hunting wear. A majority of UA's clothing offerings are made of the company's moisture-wicking and heat-dispersing fabrics, which help keep athletes dry during workouts and competition. The company's products are available on the Internet, through catalogs, and at more than 20,000 stores nationwide. Not only is UA a major competitor to NKE, but it is also the world's leading compression sports apparel brand - holding almost 80% of market share.UA was not content holding a majority of the compression apparel market, so it decided to wade into the shoe arena, which may have proved a bit of a mistake. The company feels that it can compete with NKE and Adidas, but I feel it is mistaken. I have not worn or tried on UA shoes, so I can not accurately analyze the offerings; but it has to be hard for UA to infiltrate this market. Footwear tends to be very brand loyal, and some of UA's offerings are running shoes, which is a very competitive market (with the likes of Nike, Adidas, Brooks, Mizuno, and New Balance). Can UA take some market share away from these more established competitors? It is possible, but it will take time and investors are often an impatient lot. UA is branching out into the basketball shoe world, so this could help the company in its battle with the other well-established shoe competitors.
Taking all this into consideration, I can see why Goldman Sachs upped its estimates and price target for UA. Technically, the company continues its slow and steady trek higher from its January 2009 low in the $12 region (chart available here). The stock has performed well, advancing near the $40 region, which could provide a bit of a rough go for the firm. The stock advanced as high as the $43 region in September 2008, but the economic downturn took its toll on UA. This is where I think the company could benefit from the upcoming sports seasons. We had nothing like UA when I played in college, but this company has stepped in and filled a gap to provide performance under apparel for the newest generation of football players. You can bet that there will be hoards of kids an parents in sporting goods stores all over purchasing UA compression shirts, girdles, head covers, and even socks for the upcoming pigskin season. Let's not forget that UA's undergear isn't limited to football; basketball players, lacrosse players, cheerleaders - athletes of all kinds use the undergear.
One drawback is that UA gear is pricey and the recent economic downturn has tightened wallets. It is possible that parents will be less inclined to shell out the money necessary to equip their little snowflakes in the best gear money can buy.
Bottom line: it certainly appears that the technical and fundamental aspects are there for a recovery from UA; the thing is will the economy and customers cooperate?
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Reader Comments (Page 1 of 1)
7-26-2010 @ 3:43PM
Josh Warner-Burke said...
n deck for July 27 (Tuesday) in the morning. Expectations are actually fairly soft, the consensus being only .03, the same number produced in 2Q (their weakest quarter each year) for 08 and 09. But every retailer is showing good YoY comparisons, so a good chance for a positive surprise. Some of my other reasons for liking UA in my blog post here:
http://prooftrader.com/symbol/UA/589/Can-Under-Armour-crack-the-NFLs-exclusive-contract