Who Would You Rather… Nike vs. Adidas
The athletic apparel market is one of the largest and most profitable in the world, but that isn't news to anyone over the age of, say, 10 years old. What else is not news is the fact that Nike (NYSE: NKE) and Adidas (OTC: ADDYY) are two of the world's biggest players in the athletic apparel game and have been for the better part of the last forty years. So for the savvy Wall Street investor, which is the better bet for a long-term investment?
They both are strong publicly traded companies that show significant profitability year after year in the same sector. They both have all the financial bells and whistles that investors look for in a stock, like solid market share and expected increases in respective revenues over the next several years. And they both…well, they're both just really solid investments from top to bottom. So who would you rather… Nike or Adidas?
Let's start with market value. Nike is currently the world leader in athletic apparel and footwear manufacturing and enjoys a market value of close to $50 billion. Adidas on the other hand, sits in the number two position worldwide in the same sector and has a market value of about $12 billion.
In 2012, two major athletic competitions – the Olympic Games in London and the Union of European Football Associations (UEFA) Euro 2012 – proved to be every bit the powerful drivers of the sports apparel industry that they were expected to be, which thus far has led to significant market share gains and revenue increases that are likely to continue for the next several years for both companies.
But that was over a year ago and while both companies are still performing well, Adidas has begun to lose ground in the sports apparel race. Since the Olympic and UEFA festivities died down at the end of summer 2012 and all of the hype surrounding them faded, demand in Europe, Adidas's number one market, has dwindled significantly.
The ever-diminishing value of the American dollar hasn't helped matters either as the company's number two market – North America – also served up lower sales numbers. Sales made in U.S. dollars in North America, as well as in other currencies around the globe, have a lower value thanks to the comparatively stronger euro.
What makes a huge difference in Nike's formidable lead in the sector is its presence in the National Football League. While soccer – or futbol, as our friends across the pond and everywhere else in the world call it – dominates the sporting world in much of Europe, American football is the king of sports in the United States by an almost unfairly gigantic margin.
While most professional futbol players in Europe wear Adidas, Nike is the exclusive supplier of NFL jerseys here in the States. But the NFL is just the beginning for Nike in terms of the reasons for them being the preferred stock over Adidas. Its subsidiaries are huge and include the likes of Hurley International and Converse. And with products like Nike Pro, Nike Golf, Nike+, and the global juggernaut Air Jordan Jumpman brand under its belt (to say nothing of the aforementioned lead in market share value) Nike seems to be the stock to beat, not only now but for the foreseeable future.
So, who would you rather? Nike or Adidas? Inquiring minds want to know.
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