Nike Can No Longer Ignore The Competition
It wasn't long ago that Nike Inc (NYSE: NKE) appeared as a virtual monopoly in the athletic apparel space. Adidas (OTC: ADDYY) was in the doldrums, and Under Armour Inc (NYSE: UA) had yet to achieve the success it has since earned.
Nike has been the worst performing Dow Jones component in 2016 and is losing ground as a dominate player in the Rio Olympics.
Nike has operated with complete arrogance toward the competition, and rightfully so for the most part. The company held a 96 percent share of the basketball shoe business as recently as last year, a key segment for the top shoe brands.
This figure simply wasn't sustainable over the long term; when a fashion brand has close to 100 percent market share, the brand loses its exclusivity and cool factor. This opens the door for some new players to come in.
Nike has lost about 20 percent of its basketball business and has shown signs of paying attention to its competition. The company lowered the price of its Kevin Durant and LeBron signature shoe models to compete with Curry's recent footwear success.
Under Armour has carved its own share of the market that is poised to grow. The brand only has one signature shoe line for basketball, but will surely see more over the next few years as the company adds new stars to its lineup.
The biggest performances in Rio have come from Under Armour's Michael Phelps and Usain Bolt. While some analysts don't believe an athlete's performance moves the needle much for these massive brands, much of the excitement in sports recently has come from endorsers that aren't on the Nike roster.
Adidas stock has been on an absolute roll in the last year, more than doubling since August 2015. The company has shifted its focus toward individual endorsements and is starting to improve its product lineup in the process. Adidas has done well with influencers who aren't athletes, but celebrities and pop stars, making Adidas more of a fashion staple in the past year. The company has also announced its second Speedfactory, to compete for the incoming 3D shoe trend.
While Nike's run certainly isn't over and the company still remains the leader of the industry, the company can't ignore the competition at this point.
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