The influence of fashion and lifestyle trends has played a pivotal role in the growth of the athletic wear market, boosting the athletic industry. Considering the tailwinds, in this article, I have evaluated three leading athletic stocks, Adidas AG (ADDYY), NIKE, Inc. (NKE), and Skechers U.S.A., Inc. (SKX), to determine the better investment. Based on a fundamental comparison of these stocks, SKX appears to be the best for reasons explained throughout this article.
The growing global interest in sports and fitness is driving the demand for athletic footwear, especially specialized shoes for various activities like running and walking. Fashion trends have also made sneakers and sports shoes a popular style choice beyond just athletic use.
As a result, the global athletic footwear market is estimated to reach $189.80 billion by 2028, exhibiting a CAGR of 4.3%.
Moreover, while sports apparel was initially for athletes, it is now popular with gym-goers and non-athletes. Growth in sports apparel is also driven by rising health awareness, increased fitness activities, women's participation in sports, celebrity endorsements, and improved living standards in emerging markets.
Hence, the sports apparel market is estimated to reach $410.8 billion by 2032, growing at a CAGR of 6% from 2023 to 2032.
In addition, the rise in obesity due to sedentary lifestyles and unhealthy diets, coupled with increased awareness of fitness benefits, is driving the global fitness and recreational sports centers market growth.
IMARC Group expects the global fitness and recreational sports centers market to reach $153.0 billion by 2028, exhibiting a CAGR of 4.9%.
With these favorable trends in mind, let's delve into the fundamentals of the three Athletics & Recreation stock picks, beginning with the third choice.
Stock #3: Adidas AG (ADDYY)
Headquartered in Germany, ADDYY designs, develops, produces, and markets athletic and sports lifestyle products worldwide.
The company pays an annual dividend of $0.38, which translates to a yield of 0.45% at the current price level. It has a four-year average dividend yield of 1.14%.
ADDYY’s net sales for the second quarter, ended June 30, 2023, decreased 4.5% year-over-year to €5.34 billion ($5.63 billion). Its net income came in at €95 million ($100.09 million), down 69.3% from the previous-year quarter. However, its marketing and point-of-sale expenses declined 6.9% year-over-year to €617 million ($650.05 million).
ADDYY’s EPS for its fiscal year 2023 is expected to decline 309.9% year-over-year to negative $0.41. However, its revenue for the same quarter is expected to increase 2.8% from the previous-year quarter to $24.41 billion.
The stock has gained 35.8% over the past year but declined 13.4% over the past month, closing the last trading session at $82.74.
ADDYY’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, which equates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Also, the stock has a C grade for Value, Momentum, Sentiment, Stability, and Quality. ADDYY is ranked #22 of 37 stocks in the Athletics & Recreation industry.
Beyond the POWR Ratings stated above, we’ve also graded ADDYY for Growth; click here to access all ADDYY’s ratings.
Stock #2: NIKE, Inc. (NKE)
NKE designs, develops, markets, and sells men’s, women’s, and kids' athletic footwear, apparel, equipment, and accessories worldwide.
On August 3, NKE declared a quarterly dividend of $0.34, payable on October 2, 2023. The company pays an annual dividend of $1.36, which translates to a yield of 1.51% at the current price level. It has a four-year average dividend yield of 0.94%.
NKE’s revenues increased 2% year-over-year to $12.94 billion in the fiscal first quarter ended August 31, 2023. Its gross profit increased 1.9% year-over-year to $5.72 billion. However, its net income declined 1.2% year-over-year to $1.45 billion.
While analysts expect NKE’s EPS to decline 5.9% year-over-year in the current fiscal quarter ending November 2023, its revenue is likely to rise 1.8% from the previous-year quarter to $13.56 billion. Also, it has surpassed revenue and EPS estimates in three of the trailing four quarters, which is impressive.
The stock has declined 23.5% year-to-date but gained marginally intraday to close the last trading session at $89.63.
The stock has an overall rating of C, which translates to a Neutral in our POWR Ratings system.
NKE also has a C grade for Sentiment and Momentum. It is ranked #18 in the same industry.
Click here to see the additional POWR Ratings for NKE (Growth, Stability, Value, and Quality).
Stock #1: Skechers U.S.A., Inc. (SKX)
SKX designs, develops, markets, and distributes footwear for men, women, and children worldwide. The company operates through two segments; Wholesale and Direct-to-Consumer. It offers products under the Skechers USA, Skechers Sport, Skechers Active, Modern Comfort, etc.
On September 11, SKX announced that Doja Cat, a Grammy-winning superstar and style icon, had launched her first footwear collaboration with SKX called "Skechers x Doja Cat."
This collaboration, available exclusively for a limited time on StockX, showcases Doja Cat's influence on product design and an avant-garde campaign featuring a range of sounds and texture, from pure white to dark and destructive tones.
On September 14, SKX launched the advanced Skechers Football collection with three new boots for women and men.
SKX’s sales increased 7.7% year-over-year to $2.01 billion in the second quarter that ended June 30, 2023. Its gross profit rose 18.2% from the year-ago quarter to $1.06 million and earnings from operations increased 41.2% year-over-year to $217.70 million.
Also, its net earnings grew 69% from the prior-year quarter to $152.80 million and $0.98 per share, respectively.
Analysts expect SKX’s EPS to grow 42.8% year-over-year to $0.79 in the fiscal third quarter ending September 2023. Its revenue is likely to rise 7.9% from the previous-year quarter to $2.03 billion in the same quarter. It has surpassed revenue estimates in each of the four trailing quarters.
Over the past year, the stock has gained 43.6% to close the last trading session at $47.86.
SKX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Sentiment. It is ranked #4 in the same industry.
To see SKX’s additional ratings for Stability, Momentum, and Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
NKE shares were trading at $95.07 per share on Friday morning, up $5.44 (+6.07%). Year-to-date, NKE has declined -17.98%, versus a 13.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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