The apparel industry is a treacherous place, where winners can quickly become losers as consumers' fickle preferences can often change on a dime. Yet two companies, Nike (NYSE:NKE) and Under Armour (NYSE:UAA), have defied the odds and grown at impressive rates for the last decade. Even more impressively, they both appear poised to deliver strong growth for many more years to come.
Nike needs no introduction. As the $88 billion behemoth of the sports apparel industry, Nike has long dominated its markets. Its brand is one of the most valuable and well-known brands in the world, and its innovative culture has earned it the trust of athletes across the world, as well as their millions of fans.
Nike is well-positioned to profit from the rise of a global middle class, in which millions of people in developing economies are enjoying increases in purchasing power. With more discretionary income, many people around the world are striving -- and are now more able -- to live healthier and more active lives. This global megatrend should fuel demand for Nike's performance apparel for the foreseeable future.
In addition to the emerging global middle class, management sees a host of untapped growth opportunities. Nike's direct-to-consumer e-commerce business offers the potential for years of high-margin growth. And the massive Chinese market, which still only represents approximately 10% of Nike's total revenue, gives insight into how much growth remains in international markets. Furthermore, Nike remains a largely male-centric brand and views its women's business as another enticing growth market. In fact, management expects to increase sales in Nike's women's segment to $7 billion by 2017, up from less than $5 billion in fiscal 2014.
As Nike seizes these profit opportunities and finds new ways to expand its global apparel empire, shareholders should continue to profit handsomely for many years to come.
Under Armour has long played the role of underdog in the sports apparel industry. But the hard-charging performance apparel maker is steadily increasing its share of both the sports apparel and footwear markets. So much so that some believe Under Amour is becoming a legitimate threat to the current king, Nike.
Regardless, one thing is certain: Under Armour is growing at a rapid and consistent pace. In fact, revenue has increased at a 30% compounded growth rate since 2010, including 20 consecutive quarters of more than 20% sales growth.
Leading that charge is founder and CEO Kevin Plank. A ferocious competitor, this former Maryland football special teams captain has built Under Amour into a $17 billion company, all from its humble beginnings of Plank selling t-shirts out of the trunk of his car.
Plank is tenacious, and he's on a mission to build the "biggest, baddest brand on the planet, bar none." The company has made tremendous progress in fulfilling that bold goal, as Under Armour recently surpassed Adidas as the No. 2 sports apparel brand in the U.S. Now it trails only Nike.
Investors may also appreciate the fact that Plank and other insiders own 17% of the company. This helps align management's interests with those of other long-term shareholders.
Furthermore, in the decade that I've been studying Under Armour as an investor, analyst, and portfolio manager, I've been impressed with Plank's unwavering focus on his long-term vision for the business. To understand what I mean, I'd encourage you to read through some of Under Armour's conference call transcripts, or simply watch some of Plank's interviews on YouTube. If you do, I believe you'll quickly understand why Plank is one of the business leaders I most respect.
With Plank at the helm, I'm confident Under Armour -- and its shareholders -- will continue to win in the decade ahead.
Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Apple, Nike, and Under Armour. The Motley Fool owns shares of Apple, Nike, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.