Nike's spot at the top of the sportswear pyramid seems more perilous that ever before, with a weak indicators of future sales including less orders from retails and piling up inventory in their latest quarterly report
Adidas and Under Armour are making significant gains on Nike, each launching new products and new categories to carve their own pieces of the growing sportswear pie.
Meanwhile, Nike's market share in both shoes and apparel seems to be declining.
Which of the brands has the best chance of challenging Nike's dominance? Let's take a look at the top two competitors.
The case for Under Armour
Facebook/Under Armour
Under Armour's footwear business is poised to be a major player in the future if current growth is maintained.
Under Armour has been a hot company with growth in the past two years in the 30% range year over year. In the most recent earnings call, the company beat profit expectations, but warned the pace of growth will slow through 2017 and 2o18 when considering the explosive growth the company experienced since 2009.
That considered, the company is a huge presence on the market and is on track to be a sportswear giant in its own right. Though its its 2015 worldwide net revenue was a mere $3.96 billion compared to Adidas' $18 billion (and both trailing Nike's gigantic $30 billion), its business is mostly in the US where its simple and technological approach to sportswear has resonated with consumers. It's 2016 net revenue is still projected to be nearly $5 billion
Originally not a footwear powerhouse, its new basketball shoe line has gained some notoriety, while being attached to one of the youngest and most well-known players of the sport, Steph Curry. As a result, net revenue from footwear grew 58% year-over-year as reported in the company's latest earnings report.
Under Armour, which usually sells its products under Nike's, has also made an effort to move its products upmarket with a new fashion-oriented sportswear line designed with Tim Coppens.
The case for Adidas
Last week, Adidas passed Under Armour to retake the spot of the second biggest sportswear company in the US. This is a huge milestone for the company, which was previously struggling to maintain market share in the country after previously losing touch with American tastes, losing sponsorship deals to Nike, and failing to make much of its $3.8 billion acquisition of Reebok in 2005.
Losing market share was a wake-up call for the German giant, as it is further entrenched than its American competitor, has been around for a lot longer than UA's young 20 years of life, and has nearly quadruple its revenue worldwide.
Adidas has been looking to turn that around in recent years with a refocusing on the American market started by Adidas President of North America Mark King started in 2014, and a renewed call to take on Nike by its new CEO, Kasper Rorsted.
Adidas has opened a new design lab in Nike's hometown of Portland, Oregon, launched new high-priced models that gets sneakerheads talking like the UltraBoost with celebrity spokespeople, and repositioned heritage models as fashion icons - the most famous and successful being the Stan Smith.
It also signed high profile partnerships like Kanye West's Yeezy line, and have been aggressive in pursuing endorsement deals for other teams. For apparel, Adidas has refreshed its offerings and leaned into athleisure with an upmarket line called Zne.
US sales were up 26% for Adidas according to the second quarter earnings report, with no signs of slowing down soon.
Does any of this matter?
Nike still has a lot of room to run before either Adidas or Under Armour get anywhere close to catching it. The company has an ambitious plan to reach $50 billion in worldwide revenue by 2020, powered largely by a rapidly expanding direct to consumer business. To achieve this, it will expand its store base in new ways, focused on attentiveness to making the customer experience more personal, buoyed by a more robust digital pr essence in the form of its personalized digital platform, Nike+.
However, if any company is shrink that gap by a meaningful amount, it would be the aggressive Adidas with its triple threat of diversity of well-received product, high-profile endorsements, and celebrity hype. Adidas is on track to continue its growth streak in the US market. Under Armour will expand sales and marginally market share, while still being meaningful threat to both of the bigger companies.
But if we're talking about who has a bigger shot at taking more market share from the Oregonian giant, Adidas has all the momentum right now.