Over the past couple months, the spread of the coronavirus has kept consumers house-bound, forced a slew of stores across the country to shutter and canceled numerous major sporting events.
Such measures haven’t boded well for many sportswear brands, including competitors Nike, Adidas and Under Armour. All three leading players in the industry have shouldered significant plunges in their shares the year to date — drops that are largely attributable to the overarching financial repercussions of the COVID-19 outbreak, which has taken aim at nearly every sector of the U.S. economy. Still, stock sell-offs among fashion and retail names are also tied to each company’s ability to appease investors and connect with consumers during a pandemic.
There have been clear winners and losers in the space: Although Nike’s shares have dropped 11.5% to $90.44 so far this year, investors have continued to be bullish on the athletic behemoth. The Beaverton, Ore.-based company, which posted in late March a mixed third quarter, noted earnings per share of 53 cents and revenues that improved 5% to $10.1 billion. (Market watchers had anticipated EPS of 59 cents and sales of $9.8 billion.)
Through its proactive move to shutter stores early and engage with customers through its digital channels, the Swoosh attempted to win over consumers’ trust at a time of crisis. It offered its subscription-based fitness platforms for free, delivered inspirational messaging through social media campaigns, as well as launched philanthropic initiatives such as prototyping protective face shields for medical workers. The company has also donated more than $25 million — in monetary donations, products and other efforts — to help fight the illness.
Rival Adidas, on the other hand, has made several missteps that brought about unsavory headlines: In mid-March, the German giant took heat when an alleged internal email was leaked suggesting that the brand sought to keep its outposts open as many retailers and brands were announcing the closures of their stores. The following day, Adidas announced that it would shutter all its directly owned stores.
And in late March, the company’s decision to take advantage of Germany’s eviction freeze to defer rent payments on closed stores was lambasted by officials, who explained that the protection was meant to help those facing financial hardships. Shortly after, Adidas issued an apology in an open letter and said it had paid its landlords for the month.
Two weeks ago, the company saw its net income for the first quarter plummet 97% to 20 million euros ($21.69 million at current exchange), with earnings of 13 pence (14 cents) per share. Revenues also decreased 19% to 4.75 billion euros ($5.15 billion). (It also warned of an even bigger hit in the next quarter.) Since the start of the year, Adidas’ stock fell nearly 32% to $110.64.
For Under Armour, which entered the pandemic in a challenged business position, the path to getting back on track could be a difficult one. Analysts remain bearish on the brand and have suggested that the novel coronavirus has only exacerbated the company’s struggles. Market watchers further suggest UA could continue to lose market share to Nike, Adidas and other brands in the sportswear sector as the health crisis drags on.
Although it was quick to shutter stores, donate to organizations that required COVID-19 assistance and provided free workouts via social media — all steps that rival Nike had also taken — the brand has struggled to win over Wall Street’s approval for its turnaround strategy, which entails a highly-criticized focus on the performance sector. In the year to date, Under Armour’s shares have declined more than 58% to $8.99. Yesterday, it posted a first-quarter adjusted net loss of $152 million, or 34 cents per share, while revenues fell 23% to $930.2 million. (Analysts had expected a loss of 21 cents per share and sales of $895.7 million.)
“Heading into the crisis, Under Armour was in a weak competitive position relative to peers,” said Susquehanna Financial Group analyst Sam Poser. “While the company was in the midst of regaining its footing and stabilizing its business, particularly in North America, brands such as Nike were firing on all cylinders. The crisis has amplified Under Armour’s struggles and hindered turnaround efforts as other brands have gotten stronger.”