Nostalgia at play
The latest line of athletic shirts from the in-demand company takes wearers back to their childhood. Anyone who’s ever had a childhood has likely heard of Underoos, now owned by Fruit of the Loom. Underoos feature T-shirts and underwear marked with the logo of superheroes. In their early days, the underwear sets were made to look like the uniforms worn by superheroes on TV and in comic books. Fun for any child.
When Under Armour Inc (NYSE:UA) released its “Alter Ego” line, tight-fitting compression shirts imprinted with logos for Superman, Batman, Spider-Man and Iron Man, it was immediately clear the company had a hit. The company experienced a 23% increase in sales even as profits dropped due to a heavy-duty marketing campaign promoting its technology-based line, “I Will.”
The Alter Ego brand will help reach out to a generation of 30-something, health-conscious men who have grown up watching superhero movies. As the Alter Ego line works its way through Under Armour’s second quarter, investors are likely to see a return, thanks to aggressive marketing and word-of-mouth on these new products.
Investors rushed to take action, with Under Armour Inc (NYSE:UA)’s stock climbing slightly soon after the earnings announcement. Shares of the company have grown more than fourfold since the stock’s IPO seven years ago.
This puts the company’s growth ahead of both NIKE, Inc. (NYSE:NKE) and Adidas. Both companies have been in the market for years with name recognition and a long history of stock performance that instills confidence in investors.
Impressive innovation
Still, as great as longevity is, both NIKE, Inc. (NYSE:NKE) and Adidas have to work hard to keep up with their younger rival’s innovation. Nike recently reached an intra-day high stock price following great first quarter earnings. Performance was thanks, in part, to the company’s sale of its Cole Haan brand.
While investing is attractive right now due to the company’s strong sales, NIKE, Inc. (NYSE:NKE) is still lagging in China and material costs could begin to rise. Still, the company is showing innovation with its technology-based Nike+ products and integration with iOS, which is promising to investors.
Goldman Sachs Group, Inc. (NYSE:GS) recently put its full support behind Nike, stating emphatically that the company’s recent growth is not a short-lived trend. Predicting Nike’s stock will reach $60 per share in the next six months, the bank noted that the number of people completing marathons is on the rise and athletes of all ages are springing up to participate in sports.
Unpredictable Adidas
Adidas isn’t quite as predictable as Nike and Under Armour Inc (NYSE:UA), making investors hesitant to choose it. The stock tends to fluctuate. Last year, Adidas’s earnings were down, hurt by the end of Adidas’s licensing agreement with the NFL to sell jerseys, which was picked up by Nike.
The stock is down 7% below its 52-week high of $52.92. The company is rallying, though, and is on track to earn approximately $20.3 billion this year, up from about $14.9 billion last year.
Adidas recently verbalized confidence that it would reach its goals for 2015, leading to a slight gain in stock value. Die-hard supporters see the company’s commitment to athletic wear for sports as a niche that will bring long-term success.
In other words, we may enjoy Nike’s tech gadgets or Under Armour’s synthetic compression shirts, but in the end, athletes are looking for sportswear that works. Under Armour Inc (NYSE:UA) and Nike can provide that, as well, but that news tends to get lost in all the flash.
All three companies are strong contenders in the sporting goods market, with longevity almost assured. Linking products to athletes, athletic teams, and even comic book characters can make a big difference in these companies’ success.
Nike, Under Armour Inc (NYSE:UA), and Adidas all will continue to vie for those valuable contracts, with each releasing the products that will win over their share of the market.
The article Can Nostalgia Keep Under Armour on Top? originally appeared on Fool.com and is written by Stephanie Faris.
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