Nike Inc (NKE) Stock Has a New Athleisure Rival: Adidas

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Don’t look now but Under Armour Inc (NYSE:UA) and Nike Inc (NYSE:NKE) stock have a competitor nipping at their heels.

Nike Inc (NKE) Stock Has a New Athleisure Rival: Adidas

It’s not Lululemon Athletica Inc. (NASDAQ:LULU), although that’s a pretty good guess.

No, the company ready to give these sports apparel giants a run for their money is none other than Adidas AG (ADR) (OTCMKTS:ADDYY), until recently thought to be ready for the scrap yard.

That’s right — the maker of the sneaker brand with the prominent three stripes has once again overtaken UA as the No. 2 seller of sports footwear and apparel in America. And now Nike stock — which is having its own difficulties today, with NKE off 3% — has yet another company in hot pursuit.

“We’re No. 2” never sounded so sweet. Here’s why that matters when it comes to athleisure wear.

The Stretchy Resilience of Athleisure

In recent months, the chatter in the fashion world has been that denim is on its way back ready to displace athleisure wear as the most popular staple in the wardrobes of American households. It seems many have lost the desire to wear yoga pants to every possible worldly function.

But I’m not so sure that’s entirely true. Adidas’ resurgence could point me in the direction of my ultimate answer.

According to the NPD Group, activewear sales have increased 9.5% annually over the past four years compared to an annual increase of 1% for non-activewear sales. More importantly, the differential over the past four years between the two sides was highest in 2015 when activewear sales increased by 12% year-over-year compared to flat sales for non-activewear.

If denim is taking the fight to athleisure wear, this stat doesn’t provide much support for that argument.

Neither does 2015 data from Piper Jeffrey that shows denim’s mindshare of upper-income women has gone from 20.2% in the fall of 2010 to 9.1% in the spring of 2015. At the same time, athleisure went from 2% mindshare in that particular demographic to 15.6%, or 650 basis points higher than denim.

While it might not be the most up-to-date statistic, it does show how the two categories fortunes have crossed in recent years.

Sports Apparel Companies Don’t Need Denim

Whether denim companies like Levi’s can get their swagger back — its third-quarter results ended Aug. 28 show revenues increased 4% year-over-year with adjusted EBIT up 14% — has a lot to do whether or not denim falls completely off the map.

I don’t think this will happen to denim, but I also don’t believe that athleisure is about to have some sort of meltdown. Just because Wal-Mart Stores, Inc. (NYSE:WMT) and Kohl’s Corporation (NYSE:KSS) and other discounters are getting on the athleisure trend doesn’t necessarily mean the market’s oversaturated.

In fact, it could mean just the opposite.

The reality is that companies like Nike, Adidas and Under Armour understand customers want products that they can wear every day. I’m sure if they thought denim would resonate with customers, they’d introduce their own versions of the skinny jean.

But that ain’t happening.

Athleisure is the sweet spot in sports apparel, demonstrated so ably by Lululemon, whose revenues have increased almost 200% since 2010 — and at the same time Adidas and the many other players in this category have also flourished.

It’s all about fashion and comfort, and as long as athleisure wear continues to meet these two criteria, athleisure revenue will continue to grow.

“Athleisure is not a trend that is a moment in time,” Ben Pruess, President of Sport Fashion at Under Armour said in Fortune recently. “It will evolve to modern sportswear.”

Bottom Line

Adidas becoming the new No. 2 in the U.S. puts pressure on Under Armour (and even NKE) to up its game, and that’s a good thing.

Why?

Because it reminds UA that athleisure is the key to growing its overall business. Get more people buying everyday items who aren’t fitness freaks and some of them will also buy your hardcore workout apparel or running shoes.

Forget denim. Athleisure wear is still where it’s at in apparel.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/nike-inc-nke-stock-adidas-addyy-ua-athleisure-iplace/.

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