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.
The new manufacturing process will include automated knitting techniques used in the production of the new footwear product Flyknit. Under its innovative manufacturing process, NIKE, Inc. (NYSE:NKE) is testing 3D printing on the soles of the shoes and is the first company in the footwear industry to bring this kind of innovation to the manufacturing process. Nike is anticipating total revenue of $6.7 billion for the fourth quarter of fiscal year 2013, which was $6 billion last quarter.
The North American and European region contribute 39% and 29%, respectively, to the total sales of sports apparel for NIKE, Inc. (NYSE:NKE), while Asia and Latin America contribute 27% to total sales of sports apparel. Total sales in the North American region rose 18% to $2.55 billion in the second quarter of fiscal year 2013, which was mainly driven by the introduction of Flyknit.
NIKE, Inc. (NYSE:NKE) observed an 4% increase in future orders for the third quarter of fiscal year 2013 in China by introducing new products that are more suitable for the Chinese people. Total future orders of the company, which are expected to be delivered by July 2013, are worth $9.9 billion. Moreover, NIKE, Inc. (NYSE:NKE) is expecting to gain the highest market share in Brazil due to the upcoming Football World Cup in 2014 and Olympics in 2016. The company is expecting a market share of 6.5% in the global sports apparel market, which was worth $135 billion in 2012 and is expected to reach $178 billion by 2019.
Conclusion
Under Armour Inc (NYSE:UA)’s expansion plans and dominance in the market for performance apparel is expected to show growth in sales and higher profit.
Lululemon Athletica inc. (NASDAQ:LULU) is trying to recover from the Black Luon pant issue that, from its plans of expansion, should not not affect its growth in terms of sales. The company’s innovative products and control over the Yoga apparel market assures profit in the upcoming years.
NIKE, Inc. (NYSE:NKE) is emphasizing on increasing its global presence and innovation in its manufacturing process, which will help the company grow in terms of revenue.
Therefore, I recommend buy on all these stocks.
The article 3 Sports Apparel Companies You Should Buy in June originally appeared on Fool.com and is written by Madhu Dube.
Madhu Dube has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica, Nike, and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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