Under Armour Wants to Win in the Markets and in NBA Courts
Its NBA playoffs time when a team like Golden State Warriors is presented as clear favorite. His star Stephen Curry is the image of Under Armour that aims to unseat world leader Nike sports equipment.
Not have it easy because the Warriors are on their way big teams like San Antonio and Cleveland. The regular season ended so dramatically for the team of San Francisco, beating the record of victories hoarded Chicago Bulls Michael Jordan. Curry has beaten several individual record for example scored triples in a season. Curry can become the first player that could unseat Michael Jordan as the best of all time.
Jordan already was a goldmine for Nike, which went on to create a subdivision with his name and Under Armour now expects a similar result with Curry. Meanwhile Nike has made a lifelong advertising contract to another of the great figures of the NBA LeBron James, for an amount of around 300 million dollars. In addition, Nike has replaced Adidas as supplier of the NBA franchises uniforms to what they have paid one billion dollars.
Under Armour unstoppable growth
Under Armour is the third global business of sports equipment, it has presented a growth of more than 10% in the last 27 quarters, and the last of them has had a sales growth of 30% and profit by 26% Nike contrast that although it is a more established company with a strong structure their growth rates are much lower than those of its new competitor. Nike in the last quarter grew by 8%. If we take the last few years Nike has exceeded 10% in 11 of the last 27 and had falling sales in four of them from the second half of 2008, during the global financial crisis.
The strategy Under Armour has been based on the line dedicated to its star Stephen Curry, has carved a niche in soccer outfitting for example English Totenham and launches its smart sneaker and new line of Jordan Spieth that inspired original golf shoes, combined with the introduction of new technology in apparel high quality as Micro Thread and Cool Switch. The company had also won contracts with prominent Olympic sports stars such as Michael Phelps.
An improvable balance sheet
However, an analysis of the balance of Under Armour reveals that Nike has worse indicators in the sense of a higher debt ratio 45% in the case of Under Armour versus 9% in the case of Nike. It seems logical that strong growth is financed with external resources especially given how small they are at present interest rates, but in turn implies additional risks.
Regarding liquidity ratios are in a similar situation, something better in the case of Nike that has a lower inventory accumulation as also a return on equity of Nike is higher and also has the advantage that, unlike Under Armour, It pays dividends to its investors.
In any case we have two very interesting companies investor, with two different profiles as we have seen when analyzing their figures. The PER of Under Armour (40 times) is higher than that of Nike (24), but its growth figures indicate that the company has a bright future, as does its main athlete Stephen Curry.
We expect some very exciting NBA playoffs where stakes, not only to watch what is the best team and most valuable player, who will be able to sell more shoes whether Under Armour or Nike.
Disclosure: The Luxonomist is not responsible for the views expressed in the article. The text has been written freely expressing their own ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.