By Carly Forster and Sarah Roden
Activewear has become popular this year and has grown into an acceptable form of attire for socializing as well as exercising. Find out which companies reaped the benefits of this trend in 2014 and which companies struggled to maintain momentum.
Nike:
Nike (NYSE:NKE) received a lot of publicity and TV air time this summer when they sponsored the World Cup. Nike sponsored 10 teams in the tournament—more than any other apparel company. Most notably, Nike supplied jerseys for the United States and for Brazil, the host nation. Nike shares hit an all-time high of nearly $90 in September after the tournament. Profit and expenses from the World Cup were reflected in Nike’s first quarter report released on September 25th. The report noted that demand creation expenses increased 23% year-over-year to $897 million, largely attributed to marketing investments during the World Cup. However, revenue increased 15% for the quarter of the World Cup as well.
Nike made efforts in 2014 to expand their women’s apparel business with plans to garner $2 billion in women’s apparel annual sales by 2017. Women’s apparel represented about 20% of Nike’s sales as of July 2014, but the athletic apparel company is working on new lines and designs to compete directly with Lululemon.
NKE has a 1-year high of $99.76 and a 1-year low of $69.85.
On December 15th, analyst Robert Ohmes of Bank of America maintained a Buy rating on Nike with a $110 price target. He noted that Nike sales in China have experienced a decrease in athletic apparel stores and supply. This leaves a fertile market for Nike, and Ohmes says the athletic retailer has opened factory outlet stores that will be successful in “second-tier” cities.
Ohmes has a 73% overall success rate recommending stocks with a +9.5% average return per recommendation.
The top analyst consensus for Nike on TipRanks is Strong Buy.
Gap:
Gap (NYSE:GPS) is a diverse apparel company but their Athleta line specializes in women’s workout apparel. Athleta expanded in 2014, opening 14 new stores in the third quarter of 2014, on track with Gap’s goal to have 100 operating Athleta stores by the New Year. Furthermore, Gap announced plans to open stores in India and increase their presence in China. In Gap’s most recent quarterly report on November 20th, the company posted $0.80 diluted earnings per share; an 11% year-over-year increase.
GPS has a 1-year high of $46.85 and a 1-year low of $35.46.
Gap was recently rated by analyst Anna Andreeva of Oppenheimer. On December 2nd, Andreeva downgraded Gap to a Perform. The analyst noted that while guidance for 2014 was lowered, the estimates “under new leadership [are] likely conservative” because it excludes “$0.11 of non-recurring benefits” and the “GPS is missing original expectations by ~ $0.30 this year.” She noted that Piperlime, another Gap brand, is re-positioning but Athleta “remains strong.” The analyst concluded, “While valuation [is] not taxing and expense control [is] likely continues into ’15 (minimum wage becomes offset), estimates [are] headed lower and multiple [is] unlikely to expand in absence of top-line stabilization.”
Anna Andreeva has a 57% overall success rate recommending stocks with a 5.3% average return per recommendation.
The top analyst consensus for Gap on TipRanks is Hold.
Lululemon:
Lululemon athletica (NASDAQ:LULU)) is a yoga-inspired athletic apparel retailer that produces its own clothing line which is sold in Lululemon stores across the globe. Lululemon started out the year on a negative note when they had to recall a line of yoga pants for being too see-thru. As a result, Lululemon stock dropped 20% and the company lost $2 billion in value. In addition, the company received some negative attention last year when founder Chip Wilson made controversial comments about the types of women who should and should not wear Lululemon yoga pants. Soon after, Wilson stepped down as CEO and sold half of his stock position.
However, Lululemon has been working hard to rebuild its reputation and win back its core customers in addition to drawing in new ones. In fact, the athletic retailer has become one of the fastest growing retail companies today, climbing 17% just last month.
LULU has a 1-year high of $59.84 and a 1-year low of $36.26.
Lululemon was last rated on December 16th by Cowen & Co. analyst Oliver Chen, who initiated an Outperform rating on the stock. Chen pointed out that traffic in Lululemon stores has been gradually increasing and new products, marketing initiatives, and online momentum will improve traffic even more. In addition, the analyst believes Lululemon costumers are loyal and he is optimistic that the retailer will bring in consumers at the high end of the market.
In the past year, Chen has successfully made 31 ratings out of 50 total, earning a 62% success rate recommending stocks and a +16.2% average return per recommendation.
On average, the top analyst consensus for Lululemon on TipRanks is Hold.
Under Armour:
Under Armour (NYSE:UA) is a supplier of sportswear and casual apparel. Under Armour was the sponsor of the United States speed skating team in the 2014 Sochi winter Olympics early this year. The team did not bring home any medals, blaming the athletic apparel company’s clothes for slowing them down.
However, this hasn’t stopped Under Armour from performing well in the market. The athletic retailer has posted at least double-digit profit increases in all but one of the six past quarters and they have recorded 15 consecutive quarters of double-digit sales gains. Most recently, Under Armour has been reaping the benefits of the “athleisure” trend that has been rapidly gaining popularity.
UA has a 1-year high of $73.42 and a 1-year low of $40.98.
Under Armour was last rated on November 18th by BB&T Capital Markets analyst Corinna Freedman, who gave the athletic retailer a Buy rating and an $80 price target. She noted, “We find multiple compelling drivers to support growth… Long term, we see a path towards $10B in revenue. We believe that UA can ultimately replicate its North American market share (~5%) on a global basis, which we estimate would imply an additional $5B in total revenue beyond FY’16."
In the past year, Freedman has successfully made 12 ratings out of 22 total, earning a 55% success rate recommending stocks and a +12.5% average return per recommendation.
On average, the top analyst consensus for Under Armour on TipRanks is Moderate Buy.