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NIKE Leverages Brand Power In Sportswear

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Apparel sales are a key future growth driver

NIKE’s apparel category is the second largest in terms of revenues. Apparel sales accounted for ~31% of total revenues, or $2.3 billion in 2Q15.[1. Quarter ending November 30, 2014 – Fiscal year ends on May 31, 2015] Apparel sales, however, growing by 11.0% year-over-year, trailed overall revenue growth of 14.7% in the quarter. Apparel sales in North America, NIKE’s largest market, came in at $1.1 billion in 2Q15, up 14.7%.

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Market share gains

Market share gains were recorded in the US. Just as it did with footwear, NIKE grew its market share in the sportswear apparel category in 2014. The company’s apparel market share rose from 27% in 2013 to 31% in 2014 year-to-date.[2. Through September 27 – Source: SportsOneSource]

Most gains came at the expense of global market leader in apparel, Adidas (ADDYY). The latter lost 2% share in the apparel category to finish with a US market share of 6%. Under Armour’s (UA) apparel market share, meanwhile, rose by 2% to 16%. Under Armour is now the #2 sports brand in the US in terms of sales, ranking behind industry leader NIKE (NKE).

Sportswear category growth

Sports apparel as a category is outpacing growth in the overall retail sector in the US. Since November 2012, sports apparel growth has outpaced overall retail sector growth by almost double most months. Dollar value growth in sports and riding apparel stores came in at 6.3% in November compared to 2.2% in the overall retail sector.

This trend should benefit sportswear brands including NIKE (NKE) as well as its competitors in the space, Under Armour (UA), VF Corp (VFC), The Gap’s (GPS) Athleta brand, and Lululemon Athletica (LULU), heading into 2015.

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Apparel products

NIKE’s #1 in running apparel. The company has developed new premium running markets with products such as the Dri-FIT Knit and Dri-FIT Touch performance tops. Other major products include the Air Max Lunar1, the NIKE Tech Windrunner jacket, and the Sportswear Tech Pack apparel range. Innovations like the Aeroloft vest give the company pricing power over competitors. In the second quarter, its Tech Fleece and running apparel were key growth drivers.

Apparel opportunities

Due to the evident category growth, NIKE should look to expand and offer more premium apparel products in the future, including performance wear and signature styles. It should look to leverage its geographical reach, strength in footwear, and strong brand power to drive growth across other sports categories and geographical segments.

In the next part of this series, you’ll discover why NIKE is pursuing a premium pricing strategy across categories.

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