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Nike, Under Armour, Wolverine: Which Footwear Company Is a Good Investment?

May 27, 2014 | About:
jaggom

jaggom

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The global footwear market is projected to grow at CAGR of 2% till 2018. The market is forecast to exceed $381.3 billion by the end of 2018 on the back of a growing population, greater health awareness, innovative products, growing brand awareness and rising standards of living in the emerging markets, etc.

Considering this underlying fact, let's take a closer view at three footwear giants — Nike (NKE), Under Armour (UA) and Wolverine Worldwide (WWW) — and see how they are positioned to capture this market through the e-commerce route.

According to the latest report released by Nielsen, apparel, accessories, shoes and jewelry are expected to dominate this generation of e-commerce. Also, YCharts reported that U.S. e-commerce sales are only about 5% of all retail sales, which means that there is a lot of room for improvement in the future. The e-commerce channel should gain further momentum as retailers look to eliminate costs associated with operating retail outlets. This opportunity will also help retailers in capturing a wider market irrespective of physical store locations.

Nike’s Move

Nike, being the largest athletic shoe manufacturer in the world, enjoys about 50% of the market. Nike has performed brilliantly in the past and it still looks very competitive to achieve more in the footwear industry globally. Nike’s impressive pipeline of innovative products is a very important growth driver for it, as a result of which it has earned the distinction of being the most innovative company of 2013, according to Fast Company.

In addition to this, Nike is also investing heavily in e-commerce platforms and digital products. It delivered an impressive jump of 33% in e-commerce in the previous quarter. The direct-to-consumer channel, of which e-commerce is a part, accounts for just 15% of Nike’s revenue. As a result, the company is expanding the footprint of nike.com by launching sites in Japan, the world's third largest e-commerce market, and in Brazil, which is a key growth market according to management.

As it moves ahead, Nike plans to nearly quadruple its e-commerce business in the next four to five years. Nike is determined to attain $2 billion in annual online sales, a massive jump from just $540 million in e-commerce revenue posted in the previous quarter.

In addition, Nike is seen investing aggressively in its online strategy. According to Nike brand president Trevor Edwards, “Our integrated digital strategy will ensure that our consumers get a seamless experience when they connect with the Nike brand through whichever entryway that they actually come in.”

Nike currently sells its products through the online channel in 24 countries and as we saw above, it is looking to move into newer regions that will possibly help the company to fetch better results and attain $2 billion in online sales.

What’s Up with Under Armour?

On the other side, Under Armour achieved remarkable success in 2013, as its shares gained approximately 72% during the year. Under Armour has a very strong history of growth; even during the recession, it managed to grow revenue by 18%.

In addition, Under Armour looks set to achieve its desired revenue targeted of $10 billion by the end of 2020. Also, management expects to double its revenue to $4 billion by 2016 as it goes global. Its global market accounts just 6% of its revenue.

Under Armour is focused on the global e-commerce and global retail platforms, and considers it as its key drivers in the future. To further strengthen this segment, Under Armour has appointed Mr. Jason LaRose (formerly of Express), as senior vice president of global e-commerce who will oversee the company’s online consumer experience and web business strategy. The e-commerce strategy of the company is barely a year old and it has a long way to go to catch up with Nike in this department.

Apart from this, Under Armour is working on various strategies to expand its e-commerce sales. Its e-commerce sales are expected to grow from 9% at present to approximately 205 in the near future. Under Armour is undertaking various initiatives such as conducting online campaigns on its site.

Also, according to management, 95% of Under Armour’s most popular clothing is available in the most popular sizes on its online channel, which gives the company possible opportunity to convert its customers to online business.

Wolverine Is Racing Ahead

Wolverine Worldwide has struggled in the past, but with the acquisition of Collective Brands’ PLG Brands, it has now added approximately four new brands to its portfolio. Wolverine Worldwide recently posted handy revenue growth of 9% over the prior year’s pro forma results, registering all-time record highs for the company.

Wolverine Worldwide enjoys a diverse business model, which spans 200 countries and multiple brands – both owned and licensed – across different categories. With such a footprint, e-commerce can definitely be a good growth driver as the brand is already well known. Wolverine Worldwide also has a wide network of 60 websites and 20 mobile sites that will undoubtedly increase its profitability in the coming years.

In addition, it had promoted Jodi K. Watson from vice president of e-commerce to president, consumer direct, in August 2013. However, since the company hasn’t reported e-commerce sales separately, it apparently suggests that it has a long way to go as compared to the others.

Takeaway

There’s no doubting the fact that e-commerce is a growing channel and each of these companies are trying their best to grow their business through it. Nike has the most aggressive plan as it intends to grow the e-commerce business four-fold. Under Armour is also looking promising while Wolverine still hasn’t outlined a clear-cut strategy. So, investors should keep a close eye on the e-commerce segments of both Nike and Under Armour as they can be huge growth drivers in the future.


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