Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Athletic Footwear In Full Swing

|Includes:adidas AG ADR (ADDYY), DECK, NKE, UAA, WWW

The average gross margin for the athletic footwear industry is 45%. The reason for this is simple- low input costs of raw materials. Nike Inc. dominates the market of athletic footwear, with a market share of approximately 48%. NIKE and Jordan brands together make up 59% of the total footwear sales in America, with 330 basis points of market share YoY.
Athletic footwear is divided into three categories, with the 'running' category taking over the bigger chunk of the market, precisely 35%.
Nike has been benefiting from the growth of the basketball category, which enjoys a growing 2.9% market share. It is crystal clear the sales for Nike's basketball footwear is going to shoot up. This current growth in this category has resulted in a boost for Nike's Jordan brand of basketball shoes, which alone make 58% of the revenues of the entire basketball footwear category in America.
The way for a brand to successfully make its way to the athletic footwear industry is simple. The gameplay revolves around groundbreaking new products, and the product portfolio. Nike has been the king at both, and it currently enjoys being the 30th most popular global brand, according to 2012 Brand Dictionary.
Armour took advantage of the demand of basketball footwear, and spent 24% of its revenues on marketing them in 2011. It was interesting to see Armour shoot up. It became the official performance footwear supplier of Major League Baseball in 2011, and also partnered with the National Basketball Association.
Nike and Adidas bag supplies from athletic product manufacturers, out of which Asian companies are in majority, with Vietnam, China and Indonesia being the key players. The reason for this is low labor costs, which results in gross margin improvements. 76% of Adidas's supplies are from Asia, with 16% being from America, and only 8% from Europe.
Adidas is no match for Nike. It is nowhere close to being in the Brand Directory. Adidas sponsored UK athletic teams, but lost this deal to Nike. Nike has beat Adidas by forming a strong following of famous athletes like Cristiano Ronaldo and Roger Federer among many others, together with millions of fans worldwide. It is a known fact that in the marketing world, celebrity value plays a major role in making a brand a hit.
Sports activities are in full swing during the third quarter of the year. The revenues during this period go up at least 5%, with the demand for footwear and sports outfits at a high scale. This is when Nike is at the top of its game.
The FIFA World Cup 2014 is a major opportunity for athletic brands. Adidas has been the soccer ball supplier for the UEFA Champion Leagues and FIFA World Cup. Not only that, uniforms by Adidas will be worn by the top teams of the world. Nike and Adidas are tied in competition, with Nike sponsoring Brazilian and American teams.
Together with that, Nike has replaced Reebok International Ltd, by signing a contract with NFL. Under this, Nike will be spending a good $1 billion on sponsorships. However, the company has nothing to worry about as the NFL teams will be sporting Nike's apparel. Under this contract, revenues are expected to increase %500 every year. Hence, the money spent on sponsorships will be recovered.
On the contrary, Adidas has signed contracts and marketing deals for the FIFA Worldcup 2014. One is sure revenues will go high for the company. Smaller players are showing potential, but currently, Nike is the king of the athletic apparel and footwear. It is a race, with Nike being the leader. The company has sponsorship contracts with Neymar and Cristiano Ronaldo. A closer look at this analysis suggests the obvious- the Nike stock is indeed a promising buy.