The COVID-19 pandemic kept gyms and yoga centers closed for a lengthy period last year. However, at-home fitness activities and a more casual lifestyle led to increased purchases of activewear apparel, and a fading of the distinction between office wear, casual wear and activewear. Now that nearly one-third of the U.S. population is vaccinated for COVID-19, gyms are reopening with rising demand from fitness enthusiasts. This has been driving a surge in demand for all types of fitness clothing.
Widespread rising health consciousness amid growing concerns about the impact of a remote lifestyle on physical and mental health should keep driving the demand for outdoor fitness activities and, by extension, athletic apparel. The global sports apparel market size is expected to grow at a 4.6% CAGR over the next four years to reach $308.38 billion in 2025.
Adidas AG (ADDYY)
Headquartered in Germany, ADDYY produces and markets athletics and sports lifestyle products worldwide. It offers footwear, apparel, accessories and sports gear such as bags, balls, and fitness equipment, and golf products under the Adidas and Reebok brands. The company offers its products through retail stores, mono-branded franchise stores, and wholesale distribution, as well as its e-commerce channel.
In March 2021, ADDYY devised a new strategy: ‘Own the Game’. The strategy seeks to strengthen the brand’s credibility and to create a unique consumer experience. More than 95% of sales growth is expected to come from the five categories the strategy covers: Football, Running, Training, Outdoor, and Lifestyle. The strategy could significantly increase the company’s sales and profitability and help it gain market share soon.
ADDYY’s net sales increased 20.2% year-over-year to €5.27 billion ($6.40 million) in the first quarter, ended March 31. Its operating profit grew 1362.6% from the year-ago value to €704 million ($855.42 million), while its net income increased 2050.4% year-over-year to €673.16 million ($817.94 million) over this period. ADDYY’s EPS from continuing operations rose 1547.6% year-over-year.
A $9.07 consensus EPS estimate for its fiscal year 2021 represents a 571.9% improvement year-over-year. The $26.36 million consensus revenue estimate for the current year represents a 10.2% increase from the same period last year. The stock has gained 51% over the past year.
ADDYY’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ADDYY is also rated an A in Growth, and a B in Momentum and Stability. Within the A-rated Athletics & Recreation industry, it is ranked #7 of 34 stocks.
To see additional POWR Ratings for Sentiment, Value and Quality for ADDYY, Click here.
Under Armour, Inc. (UAA)
Founded in 1996, UAA is a leading inventor, marketer and distributor of branded athletic performance apparel, footwear and accessories primarily in North America, Europe, the Middle East, Africa, the Asia-Pacific, and Latin America. The company offers its products under the Heatgear, Coldgear, Rush or Recover, UA Hovr, UA Logo, Under Armour, UA, Armour, Protect This House, and I Will brand names.
Last month, UAA unveiled plans to open new global headquarters in Port Covington in Baltimore. The new location will consolidate the company’s global corporate and Americas regional functions into one location, thereby improving operational efficiencies and innovation capabilities.
In the first quarter, ended March 31,UAA’s net revenue increased 35.5% year-over-year to $1.26 billion. Its gross profit increased 45.9% from the year-ago value to $628.64 million, while its income from operations grew 119.1% year-over-year to $106.89 million. The company reported $77.75 million in net income, representing a 113.2% increase year-over-year. Its EPS came in at $0.17 for this period, compared to a $1.30 loss per share in the prior year quarter.
Analysts expect UAA’s revenue for the current quarter, ending June 30, 2021, to be $1.21 billion, representing 70.6% year-over-year growth. The company’s EPS is likely to increase 230.8% year-over-year to $0.34 for the current year. UAA has gained 157.4% over the past year.
It is no surprise that UAA has an overall B grade, which equates to Buy in our proprietary ratings system. It has a B grade for Growth, Momentum and Quality. A-rated Athletics & Recreation industry it is ranked #16.
In total, we rate UAA on eight different levels. Beyond what we’ve stated above, we have also given UAA grades for Value, Stability and Sentiment. Get all the UAA ratings here.
DICK’S Sporting Goods, Inc. (DKS)
Formerly known as Dick’s Clothing and Sporting Goods, Inc, DKS is an authentic, full-line sporting goods retailer that offers a broad assortment of brand name sporting goods equipment in a specialty store environment, primarily in the Eastern United States. As of this month, it operated 730 DKS stores. The company also owns and operates Golf Galaxy, LLC, a multi-channel golf specialty retailer.
This month, DKS plans to expand its nationwide presence with the opening of four stores in four states–one DICK’S Sporting Goods location, one Warehouse Sale location and two locations of a new off-price store concept, dubbed Going, Going, Gone! Furthermore, the company will roll out new experiential “Soccer Shops” within current stores and debut six redesigned Golf Galaxy locations in eight additional Golf Galaxy locations. These new additions should substantially increase DKS’ sales and profitability.
During the fourth quarter ended January 31, DKS’ net sales increased 19.9% year-over-year to $3.13 billion. Its gross profit rose 43.8% from its year-ago value to $1.05 billion. The company’s net income increased 214.5% year-over-year to $219.61 million, while its EPS grew 172.8% from the prior-year quarter to $2.21.
DKS is expected to see 48.6% revenue growth year-over-year to $2.15 billion for the current quarter, ended April 2021. Its EPS is estimated to increase 160.8% from the year-ago value to $1.04 in the current quarter. Over the past year, DKS’ stock has gained 197.9%.
The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. DKS has an A grade for Momentum and Quality, and a B grade for Growth. Among the 34 stocks in the A-rated Athletics & Recreation industry, it is ranked #20.
Click here to see the additional POWR Ratings for DKS (Stability, Sentiment and Value).
Foot Locker, Inc. (FL)
FL leads the embrace of sneaker and youth culture globally through a portfolio of brands that include Foot Locker, Lady Foot Locker, Kids Foot Locker, Champs Sports, Eastbay, Footaction, and Sidestep. As of January 30, 2021, it operated through 2,998 retail stores in 27 countries, 127 franchised Foot Locker stores located in the Middle East, as well as through various e-commerce sites and mobile apps.
This month, FL launched a hands-on, global intensive design program called “Designing with Sole,” which creates opportunities for aspiring footwear and apparel designers and marketers. This program should give recognition to the underrepresented voices in the industry and should be a significant step for the company toward correcting the inequity.
FL’s net sales increased 1% sequentially to $2.19 billion in the fourth quarter, ended January 31. The company’s trailing-12-month revenue came in at $7.55 billion, while its trailing-12-month gross profit was $2.18 billion. FL generated a trailing-12-month operating income of $418 million.
The company’s EPS is expected to grow 253.7% year-over-year to $1.03 for the current quarter, ended April 2021. Its $1.85 billion revenue estimate for the current quarter indicates a 41.1% year-over-year growth. FL’s stock has gained 143.6% over the past year.
FL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. FL also has an A grade for Momentum, and a B grade for Value and Quality. The stock is ranked #21 of 34 stocks in the same industry.
In addition to the POWR Ratings grades we’ve just highlighted, you can see the FL ratings for Growth, Stability and Sentiment here.
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ADDYY shares were trading at $173.65 per share on Wednesday morning, down $0.36 (-0.21%). Year-to-date, ADDYY has declined -5.10%, versus a 9.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More...
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