A dramatic shift is taking place in the sneaker industry - and Under Armour is poised to be the biggest winner
- Adidas slippage could be good news for Under Armour, Jefferies analyst Randal Konik wrote in a note to clients.
- Under Armour has recently struggled with North America sales, but that could soon change.
- Under Armour also has promising international growth potential.
- Watch Under Armour trade in real time here.
Under Armour's achilles heel has been sluggish sales growth in North America, but that could soon change at the expense of Adidas, according to one analyst.
Stan Smith and Superstar products, which target the fashion-minded consumer, have performed well, but those "sales trends have slowed meaningfully which shows fashion offerings are fading in favor of performance," Jefferies analyst Randal Konik wrote.
He says that causing Adidas' North American market share gains to stall. The athletic-apparel maker's sales growth slowed from 21.3% in the fourth-quarter 2017 to 21% in first-quarter 2018. Konik thinks "4Q17 marked the peak in sales growth in North America."
He says to buy Foot Locker and Under Armour as a result.
Under Armour has had its fair share of struggles recently. It was recently passed tby Puma for third in global market share, according to Wedbush analyst Christopher Svezia. He says it risks falling into fifth place behind New Balance.
But Konik thinks that'll all change soon.
The industry is seeing a shift in what consumers want, he said. Adidas was thriving off of fashion-branded products, but that's no longer what consumers want. Consumers now want products centered around athletic performance. "Adidas products also benefitted from a distinct shift within athleisure to fashion products away from performance," Konik said.
Therefore, "In a performance driven athleisure environment Adidas is less well positioned while Nike and Under Armour are best positioned."
But that's not all. Konik sees big potential for Under Armour overseas. "Buy Under Armour given its large global growth opportunity, exposure to performance athletic and ability to gain back share from Adidas," he wrote.
Under Armour is up 17.08% this year.
