With the increasing workload and stress, people are taking out time to practice yoga or exercise to maintain their health. This trend has significantly boosted the sportswear market, driven by increasing health consciousness and participation in fitness activities. As people gear up to stay active, the demand for high-quality sportswear continues to rise.
Given this backdrop, I have highlighted three sportswear stocks that deserve a spot on your radar, namely, NIKE, Inc. (NKE), adidas AG (ADDYY), and Under Armour, Inc. (UAA).
As the weather warms up, outdoor fitness activities are rising, and activewear companies are seizing this opportunity by launching new collections. Sportswear, now a staple of everyday attire known as activewear or athleisure, has grown in popularity beyond athletic settings, reflecting changing consumer preferences. It’s no surprise that the global activewear market is expected to hit $917.96 billion by 2034, with a CAGR of 5.9%.
Leading brands are blending fitness with fashion, offering high-performance apparel that suits both casual and sports activities. The global sportswear market is projected to reach $784.79 billion by 2031, exhibiting a CAGR of 6.8%.
Moreover, the 2024 Paris Olympics has drawn significant attention to the fashion, luxury, health, and drinks industries, with sportswear taking center stage. The sector is set to benefit from the global television audience and sponsorships, with a forecasted global growth of 4% in 2024 compared to 2% for overall apparel and footwear. The event is driving sportswear brands to focus on high-end, high-performance gear, using advanced fabric technologies like moisture-wicking and breathable materials to meet the needs of active consumers.
So, if you want to add some promising stocks to your portfolio, keep an eye on these sportswear giants: UAA, NKE, and ADDYY as they continue to shape the future of activewear. Let’s evaluate the three Athletics & Recreation picks, beginning with the third choice.
Stock #3: Under Armour, Inc. (UAA)
UAA develops, markets, and distributes branded athletic performance apparel, footwear, and accessories for men, women, and youth. It operates in four geographic segments: North America, comprising the United States and Canada; Europe, the Middle East and Africa (EMEA); Asia-Pacific; and Latin America.
On July 30, 2024, UAA launched its new Unstoppable collection for Fall/Winter 2024, featuring premium performance materials and stylish silhouettes designed to meet modern athletes' 24/7 performance and style needs. The collection includes 60 trendy pieces for men and women, priced between 80 and 125 euros, and offers a mix-and-match approach with various seasonal colors and fits to suit personal styles.
This launch marks a pivotal moment for the company. It blends on-field innovation with off-field style and signals a strong move into the sportswear market.
On June 17, after two decades of collaboration, the University of Maryland renewed its partnership with UAA, extending its agreement for an additional 12 years through 2036. This continuation underscores their joint commitment to supporting athletes and reaffirms UAA’s strong foothold in the industry over its peers.
For the fourth quarter of 2024 (ended March 31), UAA’s net revenues decreased 4.7% year-over-year to $1.33 million. However, its gross margin expanded by 170 basis points year-over-year to 45%, primarily driven by supply chain benefits related to lower product and freight costs. The company’s adjusted net income and earnings per share for the quarter came in at $49.16 million and $0.11, respectively.
Further, its net cash inflow from operating activities was $353.97 million compared to an outflow of $123.07 million in the prior year quarter. As of March 31, 2024, its cash and cash equivalents amounted to $858.69 million, reflecting an increase of 20.8% year-over-year.
As per the fiscal year 2025 outlook, UAA projects a rise in gross margin by 75 to 100 basis points. This improvement is anticipated due to reduced promotional and discounting efforts in its direct-to-consumer business and benefits from product costing efficiencies. Additionally, the company forecasts adjusted operating income to range from $130 million to $150 million, with non-GAAP EPS expected between $0.18 and $0.21.
Analysts expect UAA’s revenue and EPS for the fiscal year ending March 2025 to decline by 10.9% and 62.5% year-over-year to $5.08 billion and $0.20, respectively. However, its revenue for the next year is forecasted to grow by 3.7% from the prior year to $5.27 billion, while its EPS is expected to increase 87.5% year-over-year to $0.38.
The stock has declined marginally over the past month to close the last trading session at $6.37.
UAA’s stance is apparent in its POWR Ratings. The stock has a grade B for Value. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 34 stocks in the Athletics & Recreation industry, it is ranked #21. Click here to see the additional UAA ratings (Growth, Momentum, Stability, Sentiment, and Quality).
Stock #2: NIKE, Inc. (NKE)
NKE began as a leading athletic retailer and evolved into a major streetwear icon. Today, it's the top global designer and distributor of athletic footwear, apparel, and accessories, catering to a wide range of sports and fitness needs. The company’s portfolio features well-known brands like NIKE, Jumpman, Converse, and Chuck Taylor, among others.
Buoyed by its strong financial performance, the company announced its shareholders a quarterly dividend of $0.37 per share on August 1. This dividend will be paid on October 1, 2024, to shareholders on record as of September 3, 2024.
With 11 years of consecutive dividend growth, NKE pays an annual dividend of $1.48, which translates to a yield of 2.07% at the current share price. Its four-year average dividend yield is 1.04%. Moreover, the company’s dividend payouts have increased at CAGRs of 10.7% and 11% over the past three and five years, respectively.
For the fourth quarter that ended May 31, 2024, NKE’s revenues amounted to $12.61 billion, while its gross profit increased marginally year-over-year to $5.63 billion. The company’s gross margin stood at 44.7%, up 110 basis points from the previous year. NKE’s EBIT rose 37.4% from the year-ago value to $1.67 billion. Moreover, its net income grew 45.5% from the previous year’s quarter to $1.50 billion, and its EPS came in at $0.99, up 50% year-over-year.
Street expects NKE’s revenue and EPS for the current year (ending May 2025) to decrease 4.6% and 20.1% year-over-year to $49.02 billion and $3.16, respectively. Nonetheless, for the fiscal year ending May 2026, NKE’s revenue and EPS are expected to grow 5.5% and 15.1% from the prior year to $51.73 billion and $3.63, respectively.
However, the stock has declined 5.3% over the past month to close the last trading session at $71.42.
NKE’s mixed fundamentals are reflected in its POWR Ratings. It has a B grade for Quality and is ranked #12 out of 34 stocks in the same industry.
Beyond what is stated above, we’ve also rated NKE for Growth, Value, Momentum, Stability, and Sentiment. Get all NKE ratings here.
Stock #1: adidas AG (ADDYY)
Headquartered in Herzogenaurach, Germany ADDYY is a leading global provider of athletic and sports lifestyle products distributed through various channels worldwide. The company’s portfolio includes footwear, apparel, and accessories under well-known brands such as adidas, adidas Golf, and Five Ten, catering to diverse consumer preferences across regions.
In the second quarter that ended on June 30, 2024, ADDYY’s net sales increased 8.9% year-over-year to €5.82 billion ($6.37 billion). The company’s gross profit stood at €2.96 billion ($3.24 billion), reflecting an increase of 8.8% from the prior year, while its operating profit improved by 96.7% from the year-ago value to €346 million ($378.76 million).
In addition, its net income and EPS from continuing operations amounted to €211million ($230.98 million) and €1.09, reflecting an increase of 119.5% and 128.8% year-over-year, respectively.
Following a stronger-than-expected performance this quarter and positive momentum, ADDYY raised its full-year outlook. The company now anticipates currency-neutral revenues to grow at a high-single-digit rate in 2024, up from a mid- to high-single-digit increase previously projected. Its operating profit is forecasted to reach around €1 billion ($1.09 billion), an increase from the earlier estimate of approximately €700 million ($766.28 million).
For the current year ending December 2024, analysts expect ADDYY’s revenue to increase 8.7% year-over-year to $25.17 billion and EPS for the same period to be $1.93. Moreover, for the next year, its revenue and EPS are forecasted to grow by 9.4% and 103.8% year-over-year to $27.54 billion and $3.94, respectively, in 2025.
ADDYY shares have surged 30.1% over the past nine months and 16.9% year-to-date to close the last trading session at $118.80.
ADDYY’s POWR Ratings reflect this outlook. It has a B grade for Growth and Stability. Out of 34 stocks in the same industry, ADDYY is ranked #6. To see the other ratings of ADDYY for Value, Momentum, Sentiment, and Quality, click here.
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NKE shares were trading at $72.85 per share on Tuesday morning, up $1.43 (+2.00%). Year-to-date, NKE has declined -32.40%, versus a 10.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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