Athletic Footwear Industry Analysis 6f375x
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Athletic Footwear and Apparel Industry GROUP 7: Kirsten Ross April Rust Wenjun Zhao Elizabeth Poe Xaio Li Juexin Feng
Friday, February 24, 2012 *link for photo: Deviantart nike
1
NAICS/SIC Codes NAICS code SIC Code
Description
316211
3021
Athletic shoes, plastics or plastics soled fabric upper (except cleated), manufacturing.
316211
3021
Athletic shoes, rubber or rubber soled fabric upper (except cleated), manufacturing.
316219
3149
Athletic shoes (except rubber or plastics soled with fabric upper) manufacturing.
316219
3149
Cleated athletic shoes manufacturing.
316219
3149
Footwear, athletic (except rubber or plastics soled with fabric upper), manufacturing.
316219
3149
Golf shoes, men’s cleated, manufacturing.
316219
3149
Golf shoes, women’s cleated, manufacturing.
316219
3149
Leather upper athletic footwear manufacturing.
316219
3149
Shoes, athletic (except rubber or plastics soled with fabric upper), manufacturing.
316219
3149
Vinyl upper athletic footwear manufacturing.
Friday, February 24, 2012
2
Major Economic Characteristics of the Industry • Billion dollar industry • This market is beginning to decline somewhat, however experts expect there could still be some small bursts of growth occasionally. • Characterized by having a small number of large players.
Friday, February 24, 2012
3
Industry Driving Forces • Fashion trends (+) • Change in society (healthy lifestyle) (+) • Changes in consumer sports preferences (sport popularity) (++) • Changes (rise) in manufacturing costs (--)
Friday, February 24, 2012
4
5 Forces Model Substitute Products (of firms in other industries)
M
Suppliers of Key Inputs
M
Rivalry Among Competing Sellers
S
Buyers
W
W
Potential New Entrants Friday, February 24, 2012
5
STRONG
5 Forces Model: Rivalry • Strong because industry is shrinking in the U.S. • Switching costs are low • Strong rivalry between large players
Friday, February 24, 2012
6
MODERATE
5 Forces Model: Substitutes • The only substitutes athletic shoes have to contend with are other types of shoes (casual shoes, dress shoes, and sandals) and none of those would be useful for the same purpose as athletic shoes so they are not true substitutes. • Athletic apparel could be substituted with other types of clothes, especially casual clothes like jeans.
Friday, February 24, 2012
7
5 Forces Model: Potential New Entrants • Costs to start up are high.
WEAK
• Hard to get new brand recognized. • Economies of scale play a huge role because its hard for new companies to grow • New companies don’t have the financial resources to compete with industry bigs like Nike and Adidas. • Its hard for new entrants to get contracts with professional leagues, universities, colleges, and celebrity athletes. Friday, February 24, 2012
8
5 Forces Model: Suppliers MODERATE
• Don’t have to contend with substitutes • Forward integration is unusual because large companies have huge brand recognition. • There are a lot of manufacturers in low cost manufacturing locations (Asia, India) so you have the option to switch.
Friday, February 24, 2012
9
WEAK
5 Forces Model: Buyers • Buying power for individual consumers is low because footwear is a basic necessity. • Buying power is also weak because there is a high volume of sales. • Buying power is strengthened because there’s a variety of options and styles.
Friday, February 24, 2012
10
Popularity/Brand Image
Strategic Group Map High Under Armour
Nike Adidas Low Narrow
Wide
Variety and Selection in Offerings Friday, February 24, 2012
11
Key Success Factors • Reputation/Image • New Product/Innovation • Manufacturing Capacity • Financial Resources • Relative Cost Position
Friday, February 24, 2012
12
Competitive Strengths Assessment Weight
Nike
Adidas
Under Armour
Reputation/Image
0.40
8/3.20
6/2.40
7/2.80
New Product Innovation
0.20
9/1.80
5/1.00
6/1.20
Manufacturing Capacity
0.10
8/0.80
6/0.60
3/0.30
Financial Resources
0.20
10/2.00
7/1.40
3/0.60
Relative Cost Position
0.10
4/0.40
6/0.60
6/0.60
Sum of Weights
1.00 8.20
6.00
5.50
KSF/Strengh Measure
Overall strength rating
Rating Scale: 1 = Very weak, 10 = Very strong
Friday, February 24, 2012
13
Our 3 Companies • Nike
• Adidas
• Under Armour
Friday, February 24, 2012
14
Nike - Background Info Nike Inc. is a company that is in the business of deg, developing, and marketing athletic footwear, apparel, accessories and equipment. They were established in 1968 and are located in Beaverton, OR. Nike is the largest seller of athletic footwear and apparel in the world. They sell their products in over 170 countries. In addition to its NIKE brand, the company also owns the following brands: Converse, Hurley, Umbro, Cole-Hann, and NIKE Golf. Another big part of Nike’s business surrounds around marketing apparel with licensed colleges, pro teams, and league logos. They are well known for their affiliation with many universities.
Friday, February 24, 2012
*Background Nike Logo comes from: hot.Pink.Nike.logo *Photo of shoes comes from: Pink/White Nike Air Link
15
Nike - SWOT Strengths •Their brand is very valuable •They are very innovative and lead the
Weaknesses •Based on their financial statements their
liquidity is decreasing industry in technological advances because •They tend to hold a lot of inventory of their focus on research and development •Their network of manufactures is well managed and costs from it are minimized •Considered a leader in the industry
Opportunities •While the market has been declining recently, recent forecasts show a positive outlook looking ahead •Online sales are booming and this would be an easy area for Nike to tap into
Friday, February 24, 2012
Threats •Costs to produce are rising •The competitive environment it becoming really intense •They have to contend with counterfeiters
16
Nike - Strategies • Nike tries to find new and innovative ways to design and create superior athletic products, and unique ways to communicate with their consumers. • Nike continues to expand in new ways: ‣
strong growth in China
‣
becoming the official sponsor of the National Football League (NFL) beginning in 2012.
• At it’s core this company revolves around innovation.
Friday, February 24, 2012
http://www.nikeinc.com/pages/history-heritage#tab6-tab
17
Nike - Financial Performance Key Ratios
• They had $20,862.00 million in Sales during 2011. • Their P/E ratio reflects that investors are confident about the firm’s outlook.
P/E
22.60
• They have a really great Debt/Equity ratio, anything less than 1 is considered good (There is enough equity in the company to cover their liabilities).
Return on Equity (%)
22.54
Total Debt/Equity
0.05
• They have the most profitable operations because they have best operating profit margin.
Operating Profit Margin (%)
13.02
• Their dividend yield is in line with fast growing companies.
Dividend Yield (%)
1.36
• Their ROE % falls within the average range.
Friday, February 24, 2012
-
P/E Ratio = $105.76/4.68 = 22.60 Return on Equity = $1,906.7 million / $9,754.0 million = 22.54% Total Debt/Equity = 591.8 million / $9,754.0 million = 0.05 Operating Profit Margin = ($19,014.0 million - $16,497.1 million) / $19,014.0 million = 13.02 Dividend Yield = 1.06 / $105.76 = 1.36
18
Nike - Marketing Performace • • • •
Target Market: Athletic and active males and females Making both their advertising and brand presences minimalist but striking Helps to create demand with releases of limited numbers of shoes to limited shops Strategic partnerships ‣ Live Strong ‣ Jordans • Expanding athletic lines ‣ Nike 6.0 - Extreme sports ‣ Nike skateboarding ‣ Nike snowboarding • Mission Statement ‣ To bring inspiration and innovation to every athlete in the world • Celebrity Endorsers include: ‣ Michael Jordan ‣ Serena Williams ‣ Tiger Woods ‣ US National Teams
Friday, February 24, 2012
19
Adidas - Background Info Adidas Group (AG) was established in 1949 and is a leader in the athletic wear industry. They design and develop their own athletic products. Some of their well-known subsidiary companies include: Reebok, CCM, and Taylormade/adidas Golf. Unlike the other companies we are looking at Adidas is not an American company, but instead is German. It’s headquarters are in Herzogenaurach, . Friday, February 24, 2012
*Background Adidas Logo comes from: lt.blue.adidas *TOP picture: ad.bounce *MIDDLE picture: lightbluerun
20
Adidas - SWOT Strengths
Weaknesses
•Considered a leader in the market •They tend to hold a lot of inventory •They have a huge international presence •They don’t have a very well established •By far the main player in the soccer market network of manufacturers which causes •They are diversified across a huge platform them to rely a lot on 3rd-party companies to of product offerings.
Opportunities
supply them with their inputs.
Threats
•They have the best potential in emerging
•The competitiveness in the market is
markets because they are established on an international level. •They have made good partnerships over the years.
intensifying. •Their production costs are rising •They have to contend with counterfeiters
Friday, February 24, 2012
21
Adidas - Strategies • Adidas’ mission: be the leading sports brand in the world. • Vision: to enhance social and environmental performance in the company and the supply chain, thereby improving the lives of the people making our products. • To achieve this the brand uses its broad and unique product portfolio made up of apparel and footwear for professional athletes and fashion. • They can address the needs of multiple consumers, take advantage of opportunities in the market from in a variety of ways and be less affected by market risks. • They are committed to product innovation and they have a strong history which separates them from other brands in the industry and provides a foundation which future growth can build upon. • Their different focuses include: ‣ “Football: Expanding strong market position” ‣ “Basketball: increasing global footprint” ‣ “Running: building credibility with high-performance athletes” ‣ “Training: creating new consumer experiences” ‣ “Outdoor: the athletic brand in the outdoors” ‣ “adidas Sport Style – style your life” Friday, February 24, 2012
22
Adidas - Financial Performance Key Ratios • Their P/E ratio is above 20, this shows strong investor confidence.
P/E
20.88
Return on Equity (%)
13.52
Total Debt/Equity
0.35
Operating Profit Margin (%)
7.46
Dividend Yield (%)
1.41
• Their Debt/Equity ratio is strong. • Their dividend yield is in line with fast growing companies. • Their ROE % falls within the average range.
Friday, February 24, 2012
-
P/E Ratio = €56.59/2.71 = 20.88 ---> Return on Equity = €568.0 million / €4,616.0 million = 13.52 ---> Total Debt/Equity = €1,615.0 million / €4,616.0 million = 0.35 ---> This is very low - GOOD Operating Profit Margin = (€11,990.0 million - €11,096.0 million) / €11,990.0 million = 7.46 ---> Dividend Yield = 0.80 / €56.59 = 1.41 --->
23
Adidas - Marketing Performance • Impossible is nothing • Global focus ‣ Soccer ‣ Cricket ‣ Rugby ‣ Etc • Key sponsor of: ‣ NBA ‣ MLS ‣ New Zealand national rugby team ‣ England Cricket Club ‣ Dale Earnhardt Jr ‣ Many many more • CSR—Corprate citizenship ‣ Global greeness ‣ Goal of being a zero emmissions company Friday, February 24, 2012
24
Under Armour - Background Info Under Armour was started as a plan to make a T-shirt that provided compression and took sweat off your skin instead of absorbing it, therefore allowing athletes to regulate body temp. The company was founded in 1996 by Kevin Plank. They were originally just in the business of making performance apparel, but they have since expanded into footwear as well. The idea behind the company is to use complex technology to meet simple needs like: • HeatGear® for when it's hot • ColdGear® for when it's cold • AllSeasonGear® when it is between the extremes. Their mission is to give the world with innovative products engineered with better fabric construction, and advanced moisture management. They want all of Under Armour‘s products to do something for you, to make you better.
Friday, February 24, 2012
*Logo: UA logo
25
Evolution of Under Armour (Image from Forbes Magazine)
Friday, February 24, 2012
http://management.fortune.cnn.com/2011/10/26/under-armour-kevin-plank/
26
Under Armour - SWOT Strengths •Seen as “cool” brand •Becoming d with more universities •Has popular celebrity endorsements •Sponsors high schools (nike and adidas don’t)
Opportunities •Could open retail locations •Expanding offerings
Friday, February 24, 2012
Weaknesses •Newcomer in shoe industry •Doesn’t have a big international presence •Currently not expanding •Focuses more on males •Lack of financial resources
Threats •Rising costs in production throughout industry •Technological advances by competitors
27
Under Armour - Strategies •
Brand Mission: “To make all athletes better through ion, design and the relentless pursuit of innovation.”
•
They are slowly building brand recognition and taking market share as shown in the figure below.
•
The company’s original growth strategy was through a “six degrees of separation” or hear-say method.
•
Unlike Nike who stresses customization and individuality, Under Armour stresses team unity and selling a “team” look.
Friday, February 24, 2012
http://www.uabiz.com/company/mission.cfm http://management.fortune.cnn.com/2011/10/26/under-armour-kevin-plank/
28
Under Armour - Financial Performance Key Ratios • The highest P/E ratio in the industry: • Investors are extremely confident in the future of this company • Their ROE % is above average. • This is the highest for the companies we are evaluating, meaning investors from this company are getting the most return on their investment in the firm.
P/E
42.27
Return on Equity (%)
17.02
Total Debt/Equity
0.12
Operating Profit Margin (%)
11.05
Friday, February 24, 2012
-
P/E Ratio = $77.58 / 1.84 = 42.27 Return on Equity = $68.5 million / $497.0 million = 22.54% Total Debt/Equity = $15.9 million / $497.0 million = 0.12 Operating Profit Margin = ($1,063.9 million - $951.6 million) / $1,063.9 million = 11.05
29
Under Armour - Marketing Performance •
• • •
Celebrity sponsorships include: ‣ Tom Brady ‣ Cam Newton ‣ Derrick Williams ‣ Hunter Mahan They have deals with many colleges including: Auburn, Maryland, Virginia Tech, and Texas Tech They are the only company that actively sponsors High Schools CSR ‣ UA Freedom: - UA works with the Wounded Worrier Project ‣ UA Green : - They are trying to implement more green technology into their performance products. Under Armour uses recycled plastic bottles to make their Green products. Their 2011 goal was to convert over 2,000,000 one liter plastic bottles into performance products. ‣ Power in Pink: - Under Armour’s breast cancer awareness program.
Friday, February 24, 2012
30
Winner/Loser •
WINNER: Nike is the big winner in this industry because they are the biggest player, the most innovative, and they have an enormous amount of financial resources available to maintain and build on their competitive advantages.
•
LOSER: Under Armour is the loser in this industry mainly because they are so small compared to the other two companies and they don’t have the financial resources or brand recognition to keep up with their competitors. •
•
Friday, February 24, 2012
One thing to mention about Under Armour is that while they currently are the weakest in the industry, their investors are the most confident, and they have the most opportunities for growth because they are so young. This firm could easily be a winner within the next 10-15 years.
Overall the companies in this industry are very similar and none are showing glaring flaws or huge vulnerabilities.
31
Summary • Nike has been and continues to be the leader in this industry. • This industry is in a trend where the small companies are disappearing or being bought up by the larger power players like Nike and Adidas. • The rivalry in this industry should continue to grow as its growth begins to decline.
Friday, February 24, 2012
32
Citations • Industry: ‣ http://galenet.galegroup.com/servlet/BCRC?vrsn=unknown&locID=ksu&ste=1 • Adidas: ‣ adidas-group.com ‣ Adidas 2010 Annual Report - http://adidas-group.corporate-publications.com/2010/gb/index.php?lang=en • Nike: ‣ Nikeinc.com ‣ Nike 2010 Annual Report - http://investors.nikeinc.com/Theme/Nike/files/doc_financials/AnnualReports/ 2010/index.html • Under Armour: ‣ UAbiz.com ‣ Under Armour 2010 Annual Report - http://files.shareholder.com/s/UARM/1709755545x0x452384/ c8786075-4201-4df1-9fc8-d9740f8d59aa/2010_Annual_Report.pdf ‣ http://management.fortune.cnn.com/2011/10/26/under-armour-kevin-plank/
Friday, February 24, 2012
33
Friday, February 24, 2012 *link for photo: Deviantart nike
1
NAICS/SIC Codes NAICS code SIC Code
Description
316211
3021
Athletic shoes, plastics or plastics soled fabric upper (except cleated), manufacturing.
316211
3021
Athletic shoes, rubber or rubber soled fabric upper (except cleated), manufacturing.
316219
3149
Athletic shoes (except rubber or plastics soled with fabric upper) manufacturing.
316219
3149
Cleated athletic shoes manufacturing.
316219
3149
Footwear, athletic (except rubber or plastics soled with fabric upper), manufacturing.
316219
3149
Golf shoes, men’s cleated, manufacturing.
316219
3149
Golf shoes, women’s cleated, manufacturing.
316219
3149
Leather upper athletic footwear manufacturing.
316219
3149
Shoes, athletic (except rubber or plastics soled with fabric upper), manufacturing.
316219
3149
Vinyl upper athletic footwear manufacturing.
Friday, February 24, 2012
2
Major Economic Characteristics of the Industry • Billion dollar industry • This market is beginning to decline somewhat, however experts expect there could still be some small bursts of growth occasionally. • Characterized by having a small number of large players.
Friday, February 24, 2012
3
Industry Driving Forces • Fashion trends (+) • Change in society (healthy lifestyle) (+) • Changes in consumer sports preferences (sport popularity) (++) • Changes (rise) in manufacturing costs (--)
Friday, February 24, 2012
4
5 Forces Model Substitute Products (of firms in other industries)
M
Suppliers of Key Inputs
M
Rivalry Among Competing Sellers
S
Buyers
W
W
Potential New Entrants Friday, February 24, 2012
5
STRONG
5 Forces Model: Rivalry • Strong because industry is shrinking in the U.S. • Switching costs are low • Strong rivalry between large players
Friday, February 24, 2012
6
MODERATE
5 Forces Model: Substitutes • The only substitutes athletic shoes have to contend with are other types of shoes (casual shoes, dress shoes, and sandals) and none of those would be useful for the same purpose as athletic shoes so they are not true substitutes. • Athletic apparel could be substituted with other types of clothes, especially casual clothes like jeans.
Friday, February 24, 2012
7
5 Forces Model: Potential New Entrants • Costs to start up are high.
WEAK
• Hard to get new brand recognized. • Economies of scale play a huge role because its hard for new companies to grow • New companies don’t have the financial resources to compete with industry bigs like Nike and Adidas. • Its hard for new entrants to get contracts with professional leagues, universities, colleges, and celebrity athletes. Friday, February 24, 2012
8
5 Forces Model: Suppliers MODERATE
• Don’t have to contend with substitutes • Forward integration is unusual because large companies have huge brand recognition. • There are a lot of manufacturers in low cost manufacturing locations (Asia, India) so you have the option to switch.
Friday, February 24, 2012
9
WEAK
5 Forces Model: Buyers • Buying power for individual consumers is low because footwear is a basic necessity. • Buying power is also weak because there is a high volume of sales. • Buying power is strengthened because there’s a variety of options and styles.
Friday, February 24, 2012
10
Popularity/Brand Image
Strategic Group Map High Under Armour
Nike Adidas Low Narrow
Wide
Variety and Selection in Offerings Friday, February 24, 2012
11
Key Success Factors • Reputation/Image • New Product/Innovation • Manufacturing Capacity • Financial Resources • Relative Cost Position
Friday, February 24, 2012
12
Competitive Strengths Assessment Weight
Nike
Adidas
Under Armour
Reputation/Image
0.40
8/3.20
6/2.40
7/2.80
New Product Innovation
0.20
9/1.80
5/1.00
6/1.20
Manufacturing Capacity
0.10
8/0.80
6/0.60
3/0.30
Financial Resources
0.20
10/2.00
7/1.40
3/0.60
Relative Cost Position
0.10
4/0.40
6/0.60
6/0.60
Sum of Weights
1.00 8.20
6.00
5.50
KSF/Strengh Measure
Overall strength rating
Rating Scale: 1 = Very weak, 10 = Very strong
Friday, February 24, 2012
13
Our 3 Companies • Nike
• Adidas
• Under Armour
Friday, February 24, 2012
14
Nike - Background Info Nike Inc. is a company that is in the business of deg, developing, and marketing athletic footwear, apparel, accessories and equipment. They were established in 1968 and are located in Beaverton, OR. Nike is the largest seller of athletic footwear and apparel in the world. They sell their products in over 170 countries. In addition to its NIKE brand, the company also owns the following brands: Converse, Hurley, Umbro, Cole-Hann, and NIKE Golf. Another big part of Nike’s business surrounds around marketing apparel with licensed colleges, pro teams, and league logos. They are well known for their affiliation with many universities.
Friday, February 24, 2012
*Background Nike Logo comes from: hot.Pink.Nike.logo *Photo of shoes comes from: Pink/White Nike Air Link
15
Nike - SWOT Strengths •Their brand is very valuable •They are very innovative and lead the
Weaknesses •Based on their financial statements their
liquidity is decreasing industry in technological advances because •They tend to hold a lot of inventory of their focus on research and development •Their network of manufactures is well managed and costs from it are minimized •Considered a leader in the industry
Opportunities •While the market has been declining recently, recent forecasts show a positive outlook looking ahead •Online sales are booming and this would be an easy area for Nike to tap into
Friday, February 24, 2012
Threats •Costs to produce are rising •The competitive environment it becoming really intense •They have to contend with counterfeiters
16
Nike - Strategies • Nike tries to find new and innovative ways to design and create superior athletic products, and unique ways to communicate with their consumers. • Nike continues to expand in new ways: ‣
strong growth in China
‣
becoming the official sponsor of the National Football League (NFL) beginning in 2012.
• At it’s core this company revolves around innovation.
Friday, February 24, 2012
http://www.nikeinc.com/pages/history-heritage#tab6-tab
17
Nike - Financial Performance Key Ratios
• They had $20,862.00 million in Sales during 2011. • Their P/E ratio reflects that investors are confident about the firm’s outlook.
P/E
22.60
• They have a really great Debt/Equity ratio, anything less than 1 is considered good (There is enough equity in the company to cover their liabilities).
Return on Equity (%)
22.54
Total Debt/Equity
0.05
• They have the most profitable operations because they have best operating profit margin.
Operating Profit Margin (%)
13.02
• Their dividend yield is in line with fast growing companies.
Dividend Yield (%)
1.36
• Their ROE % falls within the average range.
Friday, February 24, 2012
-
P/E Ratio = $105.76/4.68 = 22.60 Return on Equity = $1,906.7 million / $9,754.0 million = 22.54% Total Debt/Equity = 591.8 million / $9,754.0 million = 0.05 Operating Profit Margin = ($19,014.0 million - $16,497.1 million) / $19,014.0 million = 13.02 Dividend Yield = 1.06 / $105.76 = 1.36
18
Nike - Marketing Performace • • • •
Target Market: Athletic and active males and females Making both their advertising and brand presences minimalist but striking Helps to create demand with releases of limited numbers of shoes to limited shops Strategic partnerships ‣ Live Strong ‣ Jordans • Expanding athletic lines ‣ Nike 6.0 - Extreme sports ‣ Nike skateboarding ‣ Nike snowboarding • Mission Statement ‣ To bring inspiration and innovation to every athlete in the world • Celebrity Endorsers include: ‣ Michael Jordan ‣ Serena Williams ‣ Tiger Woods ‣ US National Teams
Friday, February 24, 2012
19
Adidas - Background Info Adidas Group (AG) was established in 1949 and is a leader in the athletic wear industry. They design and develop their own athletic products. Some of their well-known subsidiary companies include: Reebok, CCM, and Taylormade/adidas Golf. Unlike the other companies we are looking at Adidas is not an American company, but instead is German. It’s headquarters are in Herzogenaurach, . Friday, February 24, 2012
*Background Adidas Logo comes from: lt.blue.adidas *TOP picture: ad.bounce *MIDDLE picture: lightbluerun
20
Adidas - SWOT Strengths
Weaknesses
•Considered a leader in the market •They tend to hold a lot of inventory •They have a huge international presence •They don’t have a very well established •By far the main player in the soccer market network of manufacturers which causes •They are diversified across a huge platform them to rely a lot on 3rd-party companies to of product offerings.
Opportunities
supply them with their inputs.
Threats
•They have the best potential in emerging
•The competitiveness in the market is
markets because they are established on an international level. •They have made good partnerships over the years.
intensifying. •Their production costs are rising •They have to contend with counterfeiters
Friday, February 24, 2012
21
Adidas - Strategies • Adidas’ mission: be the leading sports brand in the world. • Vision: to enhance social and environmental performance in the company and the supply chain, thereby improving the lives of the people making our products. • To achieve this the brand uses its broad and unique product portfolio made up of apparel and footwear for professional athletes and fashion. • They can address the needs of multiple consumers, take advantage of opportunities in the market from in a variety of ways and be less affected by market risks. • They are committed to product innovation and they have a strong history which separates them from other brands in the industry and provides a foundation which future growth can build upon. • Their different focuses include: ‣ “Football: Expanding strong market position” ‣ “Basketball: increasing global footprint” ‣ “Running: building credibility with high-performance athletes” ‣ “Training: creating new consumer experiences” ‣ “Outdoor: the athletic brand in the outdoors” ‣ “adidas Sport Style – style your life” Friday, February 24, 2012
22
Adidas - Financial Performance Key Ratios • Their P/E ratio is above 20, this shows strong investor confidence.
P/E
20.88
Return on Equity (%)
13.52
Total Debt/Equity
0.35
Operating Profit Margin (%)
7.46
Dividend Yield (%)
1.41
• Their Debt/Equity ratio is strong. • Their dividend yield is in line with fast growing companies. • Their ROE % falls within the average range.
Friday, February 24, 2012
-
P/E Ratio = €56.59/2.71 = 20.88 ---> Return on Equity = €568.0 million / €4,616.0 million = 13.52 ---> Total Debt/Equity = €1,615.0 million / €4,616.0 million = 0.35 ---> This is very low - GOOD Operating Profit Margin = (€11,990.0 million - €11,096.0 million) / €11,990.0 million = 7.46 ---> Dividend Yield = 0.80 / €56.59 = 1.41 --->
23
Adidas - Marketing Performance • Impossible is nothing • Global focus ‣ Soccer ‣ Cricket ‣ Rugby ‣ Etc • Key sponsor of: ‣ NBA ‣ MLS ‣ New Zealand national rugby team ‣ England Cricket Club ‣ Dale Earnhardt Jr ‣ Many many more • CSR—Corprate citizenship ‣ Global greeness ‣ Goal of being a zero emmissions company Friday, February 24, 2012
24
Under Armour - Background Info Under Armour was started as a plan to make a T-shirt that provided compression and took sweat off your skin instead of absorbing it, therefore allowing athletes to regulate body temp. The company was founded in 1996 by Kevin Plank. They were originally just in the business of making performance apparel, but they have since expanded into footwear as well. The idea behind the company is to use complex technology to meet simple needs like: • HeatGear® for when it's hot • ColdGear® for when it's cold • AllSeasonGear® when it is between the extremes. Their mission is to give the world with innovative products engineered with better fabric construction, and advanced moisture management. They want all of Under Armour‘s products to do something for you, to make you better.
Friday, February 24, 2012
*Logo: UA logo
25
Evolution of Under Armour (Image from Forbes Magazine)
Friday, February 24, 2012
http://management.fortune.cnn.com/2011/10/26/under-armour-kevin-plank/
26
Under Armour - SWOT Strengths •Seen as “cool” brand •Becoming d with more universities •Has popular celebrity endorsements •Sponsors high schools (nike and adidas don’t)
Opportunities •Could open retail locations •Expanding offerings
Friday, February 24, 2012
Weaknesses •Newcomer in shoe industry •Doesn’t have a big international presence •Currently not expanding •Focuses more on males •Lack of financial resources
Threats •Rising costs in production throughout industry •Technological advances by competitors
27
Under Armour - Strategies •
Brand Mission: “To make all athletes better through ion, design and the relentless pursuit of innovation.”
•
They are slowly building brand recognition and taking market share as shown in the figure below.
•
The company’s original growth strategy was through a “six degrees of separation” or hear-say method.
•
Unlike Nike who stresses customization and individuality, Under Armour stresses team unity and selling a “team” look.
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http://www.uabiz.com/company/mission.cfm http://management.fortune.cnn.com/2011/10/26/under-armour-kevin-plank/
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Under Armour - Financial Performance Key Ratios • The highest P/E ratio in the industry: • Investors are extremely confident in the future of this company • Their ROE % is above average. • This is the highest for the companies we are evaluating, meaning investors from this company are getting the most return on their investment in the firm.
P/E
42.27
Return on Equity (%)
17.02
Total Debt/Equity
0.12
Operating Profit Margin (%)
11.05
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-
P/E Ratio = $77.58 / 1.84 = 42.27 Return on Equity = $68.5 million / $497.0 million = 22.54% Total Debt/Equity = $15.9 million / $497.0 million = 0.12 Operating Profit Margin = ($1,063.9 million - $951.6 million) / $1,063.9 million = 11.05
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Under Armour - Marketing Performance •
• • •
Celebrity sponsorships include: ‣ Tom Brady ‣ Cam Newton ‣ Derrick Williams ‣ Hunter Mahan They have deals with many colleges including: Auburn, Maryland, Virginia Tech, and Texas Tech They are the only company that actively sponsors High Schools CSR ‣ UA Freedom: - UA works with the Wounded Worrier Project ‣ UA Green : - They are trying to implement more green technology into their performance products. Under Armour uses recycled plastic bottles to make their Green products. Their 2011 goal was to convert over 2,000,000 one liter plastic bottles into performance products. ‣ Power in Pink: - Under Armour’s breast cancer awareness program.
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Winner/Loser •
WINNER: Nike is the big winner in this industry because they are the biggest player, the most innovative, and they have an enormous amount of financial resources available to maintain and build on their competitive advantages.
•
LOSER: Under Armour is the loser in this industry mainly because they are so small compared to the other two companies and they don’t have the financial resources or brand recognition to keep up with their competitors. •
•
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One thing to mention about Under Armour is that while they currently are the weakest in the industry, their investors are the most confident, and they have the most opportunities for growth because they are so young. This firm could easily be a winner within the next 10-15 years.
Overall the companies in this industry are very similar and none are showing glaring flaws or huge vulnerabilities.
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Summary • Nike has been and continues to be the leader in this industry. • This industry is in a trend where the small companies are disappearing or being bought up by the larger power players like Nike and Adidas. • The rivalry in this industry should continue to grow as its growth begins to decline.
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Citations • Industry: ‣ http://galenet.galegroup.com/servlet/BCRC?vrsn=unknown&locID=ksu&ste=1 • Adidas: ‣ adidas-group.com ‣ Adidas 2010 Annual Report - http://adidas-group.corporate-publications.com/2010/gb/index.php?lang=en • Nike: ‣ Nikeinc.com ‣ Nike 2010 Annual Report - http://investors.nikeinc.com/Theme/Nike/files/doc_financials/AnnualReports/ 2010/index.html • Under Armour: ‣ UAbiz.com ‣ Under Armour 2010 Annual Report - http://files.shareholder.com/s/UARM/1709755545x0x452384/ c8786075-4201-4df1-9fc8-d9740f8d59aa/2010_Annual_Report.pdf ‣ http://management.fortune.cnn.com/2011/10/26/under-armour-kevin-plank/
Friday, February 24, 2012
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