Under Armour Inc (UA), Lululemon Athletica inc. (LULU), NIKE, Inc. (NKE): Three Sports Apparel Companies You Should Buy in June

The value of sporting goods sold in the U.S. every year is $80 billion. The reason for the high number of sales is due to change in purchasing behavior of consumers. People are now more inclined to be healthy and adapt to active lifestyles. The sports apparel retail chains are taking advantage of this changing trend, and are looking forward to expanding their business.

Business segment performing well

Under Armour Inc (NYSE:UA) leads the performance apparel market with a market share of 70%. The company offers three gearlines — Hotgear, Coldgear, and Allseasongear, which are preferred by professional athletes and consumers. The total apparel sales for the company witnessed a 22% increase to $346 million in the first quarter of 2013, quarter over quarter. The new product under its Hotgear gearline, the Heatgear Sonic, with new features like anti-odor technology and 360 degree reflection, drove sales.

Also, the new Fleece line and Alter Egoproduct line, which includes Batman and Superman shirts, gave a boost to the sales numbers. Under Armour is expecting total revenue of $2.23 billion for fiscal year 2013 on the basis of further growth in the sales of these new products.

Additionally, Under Armour Inc (NYSE:UA) is planning to open 29 new outlets by 2020 in the U.S., out of which 10 outlets will start operations by the end of 2013. The average square footage for these new outlets will be 9000 sq. ft., which is currently 5200 sq. ft. for its 101 outlets owned. Presently, these 101 outlets generate operating income of $800 per sq. ft., and hence, Under Armour Inc (NYSE:UA) is expecting to produce operating income of $72 million in fiscal year of 2013 from the new outlets. The company is expecting a total operating income of $258 million in 2013.

Market leader in the segment

Lululemon Athletica inc. (NASDAQ:LULU), which specializes in yoga apparel, is working on the Black Luon yoga pant issue because female customers complained about pants being less opaque and more see-through. The Yoga pants contribute to 17% of the women’s pants segment and cost between $78 to $98. The company is giving a refund option to customers who purchased the product after March 1, 2013, which will result in a loss of $60 million, as per the company’s expectation. The product’s opaque replacement is expected to be available in stores by this month. Lululemon Athletica inc. (NASDAQ:LULU) is expecting total revenue of $345 million for the first quarter of 2013 on the basis of meeting the lost demand for the product.

To cover up the expected loss, the company is planning to expand its business in the North American market by taking its total number of stores to 150 from the current 135. Lululemon Athletica inc. (NASDAQ:LULU) currently generates $2500 per sq. ft. from its 135 stores in North America, with an average size of 2,900 sq. ft. The company reported total revenue of $1.3 billion in the last quarter of 2012, up from $1 billion last year. Lululemon Athletica inc. (NASDAQ:LULU) is expecting total revenue of $2.17 billion for the fiscal year 2013 because of its dominance in the Yoga apparel segment with only one competitor in the market, which is Dick’s Sporting Goods.

Increasing global footprints

Yeu Yuen, one of NIKE, Inc. (NYSE:NKE)’s largest footwear manufacturers, based in Indonesia, announced a 50% wage increase due to rise in higher minimum wages. Yeu Yuen represents 25% of total footwear manufacturing of the company after Vietnam (41%) and China (32%). But, the company is positive that this will not affect its current sales or the prices of the products on the basis of new innovations in the manufacturing process.