Adidas case audio

This chart shows how far Adidas has fallen in footwear

The company is stumbling just as its main competitors are making big strides. You could call the phenomenon "vanishing stripes." For decades, the logos that filled the courts and fields of America were all Nike swooshes and Adidas stripes. These days, more and more, you might see the symbols for Under Armour, New Balance, Asics, Li Ning, or even Skechers. Adidas Group, which owns Adidas, Reebok, and golf brand TaylorMade, is still the No. 1 sports apparel brand (not footwear) in the world by market share. But in the United States, it has been in a free-fall for several years. In apparel, Adidas ceded its No. 2 spot last year to Under Armour, which is surging. In footwear, the numbers are also grim. U.S. Footwear Market Share This chart uses 2010 to 2014 U.S. athletic footwear market data from Sporting Goods Intelligence. Based on the data, Nike, VF Corp (which owns Timberland, Reef, Vans, The North Face, and others), and Under Armour (still only an asterisk in sneakers, but growing faster each year) have each risen, while Adidas has steadily fallen. In 2014, VF Corp surpassed Adidas Group in the U.S. Look at 2011-2012 specifically. At that point, Adidas suddenly begins to trend downward—and it hasn't bounced back since. What happened? Adidas Group CEO Herbert Hainer says that the company, which is based in Herzogenaurach, Germany, has "not been as present" in American sports as it should have been. "We definitely have made mistakes, there is no doubt," Hainer told Fortune. "We are everywhere else in the world much more successful. In the U.S., we have not invested enough. I think in hindsight, we have not been as present in American football and in baseball as we should be. These are big sports in America. And I think we need closer contact to the consumer in America." Analysts add that Adidas's slip isn't just due to its own stumbles; its missteps also came right at the wrong time, as Nike NKE -0.15% and Under Armour UA -0.31% are killing it. (In 2014, Nike's global sales grew more than 10% and Under Armour's grew nearly 30% while Adidas's grew only 2% on a currency-neutral basis, and declined when measured in U.S. dollars.) "The product pipeline at Nike is just remarkable right now," explains Matt Powell, an analyst with NPD Group and a major voice in the sneaker industry. Eric Tracy, an analyst with Janney Capital Markets, adds, "The easy answer is they haven't been keeping pace on the innovation front. And Reebok has been an albatross on their neck." (Adidas Group bought Reebok in 2006 for $3.8 billion; in recent years some critics said it should sell it off, but now the company has positioned Reebok as a fitness brand, and the brand's sales were up 5% in 2014 globally.) To be sure, Adidas has enjoyed some small wins and superlatives in the footwear game recently. It has built to an estimated 30% market share in (American) football cleats; its "Adizero 5-Star 4.0" is the bestselling speed football cleat; and the company boasts that its "Adizero 99g" is the lightest soccer cleat ever. Matt Powell says, "Some of the new soccer boots Adidas has made have been incredibly innovative. That's not a big deal in the U.S., but it's certainly big outside the U.S." Adidas has also found some success with its "Boost" cushioning technology, which it first used in running shoes but has now applied in basketball, baseball, skate, and golf, among others. (Boost is also in the Yeezy Boost shoes that came out in February.) Boost uses a sole of fused plastic pellets to absorb energy. First launched in 2013, Adidas advanced the line this year with "Ultra Boost," priced at $180. The Ultra Boost foam packs in 3,000 energy capsules—50% more than the 2,000 found in its standard Boost shoes. Another form of Boost shoes, "Pure Boost," was Complex's best sneaker of 2014. But it will take great strides to compete again with Nike. Take basketball as one example: in 2014, Nike sold $340 million worth of LeBron James signature sneakers; Adidas sold $32 million of its Derrick Rose shoes. (Rose, who plays for the Chicago Bulls, is Adidas's biggest basketball endorser, but he has been plagued with injuries and missed nearly two full seasons in the last four.) Kobe Bryant, Kevin Durant, and Chris Paul's signature shoes all sold more than Rose's shoes last year—all three of them are Nike or Jordan Brand (owned by Nike) athletes. Adidas continues to blend fashion and sport in interesting ways. For example, last month it released a Damian Lillard "PDX Carpet" sneaker that pays homage to the beloved Portland Airport carpet pattern. But it is debatable whether the fashion focus will be a successful strategy for a mega sports brand in America

Can Kanye save Adidas?

The iconic sports apparel and sneaker company has lost significant market share and muddled its image with consumers. Its latest push into hip-hop fashion has some analysts wondering whether it can ever outrun Nike again. The show, said the L.A. Times, drew "possibly one of the highest-wattage front rows in New York Fashion Week history." The New York Times said it "certainly had the front row of the year." Glamour said, "It was like, seriously packed." On a Thursday night in February, Jay Z, Beyoncé, Rihanna, Sean ("Puff Daddy") Combs, Vogue editor Anna Wintour—"and no fewer than six Kardashians," by the New York Post's count—squeezed elbow to elbow into a SoHo event space to see Kanye West debut his "Kanye West x Adidas Originals Yeezy Season 1" collection. (Justin Bieber was there too, but apparently couldn't get a seat in front.) As a lone trumpet solemnly blared, 45 models marched out in a mélange of blousy sweatshirts, bomber jackets, and flesh-toned bodysuits. The buzz wasn't about the clothes, though. Hardly. It was about the sneakers. The rapper followed his models on the catwalk sporting a pair: gray suede high-tops that fell somewhere on the fashion spectrum between mukluks and moon boots. These were the new Yeezy Boost, rumors (and sightings) of which had swirled around the web for months. That night, not far from Madison Square Garden, West switched effortlessly from fashion designer to megawatt rap star, kicking off the NBA's All-Star Weekend—the world's most high-profile sneaker showcase—with a free concert, co-hosted by last season's league MVP, Kevin Durant. West praised Adidas from the stage and told the crowd to shun archcompetitor Nike: "We ain't wearing that other company no more, right?" The very next night he was busting onstage at a Drake concert, handing the fellow superstar his signature sneaks. (Drake set them atop a speaker, where they remained for the rest of the set.) The next morning West was delivering pairs of the shoes to surprised fans at an Adidas store in SoHo. KANYE WEST x adidas NY Launch The collaboration with Kanye West has given Adidas plenty of buzz. Whether it will bump up sneaker sales is more doubtful. Photograph by Leandro Justen—AP Images By Sunday's end the "conversation" about Adidas and Yeezy Boost had lit up social media, with social analytics firm Networked Insights recording 141,077 related posts—20% more than the sum of posts about Nike NKE -0.17% , which had likewise set up a flotilla of big-dollar marketing events for the All-Star celebration. Sure enough, the Yeezy Boost was a bona fide hit with sneakerheads, bloggers, and urban fashionistas everywhere. When the shoe, priced at $350 a pair, finally went on sale online days later, the first run of 9,000 sold out within minutes. You can now find them on eBay selling for as much as $7,000. "This was an Adidas weekend," Herbert Hainer, the longtime CEO of the German sports apparel company, declares in a sprawling interview with Fortune at the company's home base in Herzogenaurach. "It was all about Adidas." Brand chief Eric Liedtke, an American who works at the headquarters in Germany, is more gushing (if less family-friendly): "We had no right beating Nike on that. But we're getting our shit together, that's why." Corporate marketing teams the world over live for launches like this, of course. The question is, What exactly is Adidas launching into? The $16-billion-a-year sports apparel and footwear company, at long last, has some news to crow about. In the latest quarter, global revenue for the corporation—which, besides the Adidas brand, owns Reebok and the venerable golf name TaylorMade—rose 17% year over year and was a first-quarter record for the company (though the increase drops to 9% if you remove the effects of currency fluctuation). Much of the gain comes on the strength of its flagship Adidas brand—or, rather, a segment of it called Originals. The success of Originals, a lifestyles brand within a brand, has in turn been driven by collaborations with West and Pharrell Williams—the Grammy-guzzling hip-hop artist and well-liked coach on The Voice. It's a music-fashion-celebrity thing, and it has yet to translate into credibility in the main area in which Adidas competes: sports. That wouldn't be such a bad thing, except that in the case of sports footwear and apparel, almost all the money is in, well, sports. The "sport performance" segment accounts for 70% of global sales for the Adidas brand. Here, Yeezus wheezes. Nike Inc., with its namesake brand, Air Jordans, and Converse, has scooped up a nearly 50% share of the U.S. athletic footwear market. Adidas Group's slice is a mere 9% and has declined every year since 2011. The strong first quarter aside, the company's overall revenue has fallen in back-to-back years when measured in U.S. dollars, with 2014 net income ($593 million) sinking to its lowest level since the recession-racked 2009. (The company, which reports its financial results in euros, says currency fluctuations make its recent sales and profit numbers look worse than they are; it says its 2014 net sales of 14.8 billion euros were actually up 2% from 2013.) To be sure, Adidas still dominates the sport that dominates much of the earth. Its share of the global soccer market is an estimated 39%. But here, too, Nike is closing in fast. A warning shot if ever there was one: Nike's sales in Western Europe, Adidas's home turf, grew three times as fast last year as Adidas's. It is in the States, however, where the battle royale is. Here is the place where some 40% of the world's sports apparel and footwear sales are made. Here is where, for decades, Adidas was the cleat to beat. And here is where, today, nine of the 10 top-selling sneakers in the U.S. belong to Nike. The one holdout, meanwhile, isn't even an offering from Adidas, but rather a shoe from Under Armour UA -0.31% —whose sizzling growth rate has lifted the company to the No. 2 rank (behind Nike) in the sports apparel category in the U.S. That dropped Adidas to No. 3, for the first time this century. Don't count on Kanye to change that roster anytime soon. Nobody is going to play street ball in Yeezy Boosts. As one morning radio DJ told West when he came to plug the shoe: It looks "like a papier-mâché project." Hainer, Herbert - Manager, CEO of Adidas AG, Germany CEO Hainer acknowledges that Adidas has "not been present enough" in American sports. Photograph by Albert Foss—Getty Images Hainer says he understands the company has "not been present enough" in American sports—and to succeed in the U.S., Adidas needs to remind Americans that it is a running-shooting-scoring brand first and foremost. All of which sets up the company's recent success with Originals as an awkward challenge of its own. The bigger it gets in lifestyle and fashion, the less it may be seen as a cutting-edge sports company. And once that goes, there may be no going back. If you want a road map for how Adidas ended up in this spot, look no further than its relationship with Derrick Rose. Rose was the No. 1 pick in the 2008 NBA draft, when the 19-year-old quit the University of Memphis for the Chicago Bulls. At 22, the 6-foot-3 point guard became the league's youngest-ever MVP. Rose was poised to be the new king of basketball. So it must have seemed like a coup to many when, in February 2012, Adidas extended his endorsement contract into a "lifetime" deal reported to be worth up to $260 million over 14 years, including achievement bonuses. (Adidas won't confirm the figure.) The brand made Rose the global face of the company, with billboards, social media blitzes, television ads, and of course a signature basketball shoe. Then he got hurt. In an April 2012 playoff game, he fell to the court, wincing in pain. He had torn the ACL in his left knee. After surgery that May, he missed the entire 2012-13 season. It appeared Rose would come back for the 2013-14 season. Adidas went all in, launching a campaign it dubbed "The Return," complete with a web series documenting his recovery. Again, both player and brand got unlucky. Rose came back only to injure his other knee just four weeks into the new season, forcing him to sit out another year. This season he played in 46 games (his most since 2010) before hurting his knee yet again in February, undergoing major surgery, and finally returning for a short run in the playoffs. It was nothing but bad luck that hit Rose. It was bad luck (and perhaps bad judgment) that Adidas bet the farm on one marquee player. "God, they gave him too much," says Bob Dorfman, sports marketing adviser at Baker Street Advertising. Hainer, for his part, understands the brutal calculus of endorsements: "We suffer with the player," he says, shrugging his shoulders helplessly. "Obviously, if he's not playing, he's not as visible as we'd like, and it hurts us." The bad luck didn't stop with Rose. Adidas seemed to have a knack for inking endorsement deals with the wrong players. It signed a multiyear deal with Dwight Howard, a former No. 1 draft pick who later won the NBA's Slam-Dunk Contest in a Superman cape. But Howard, who jumped from Orlando to Los Angeles to Houston, seemed to make as many enemies on and off the court as he did rebounds—or enough, anyway, to fill SB Nation's "A History of Hating Dwight Howard"—which generally doesn't translate into marketability, says Dorfman. SneakerNews.com called Howard's signature line for Adidas "perhaps the most underwhelming in the history of basketball shoes." In the end, it is numbers rather than names that best capture Adidas's awkward run with the NBA: $400 million and 96%. The first figure is what the German company reportedly spent in 2006 to be the league's official apparel provider, getting the chance to have its three stripes on all NBA merchandise (though not game jerseys) for 11 years. The second is Nike's current share of the basketball footwear market. After nearly 10 years of sponsorship, Adidas is little more than an asterisk in basketball shoes, with less than 3%. Last month the company waved a white flag in the sport, announcing it would not seek a renewal when the deal expires after the 2016-17 season. (Nike has reportedly picked up the contract.) By then, Adidas will no longer be the official sponsor for any of the big three American sports leagues. The German company's two mighty rivals, Nike and Under Armour, have done a lot right, says Stifel Nicolaus analyst Jim Duffy, "but both have benefited from Adidas just not even showing up." As much as people talk up the Adidas rivalry with Nike, it has been Under Armour's streak of a rise that has execs in Herzogenaurach scared. Falling to No. 3 in sports apparel market share in the States raised alarm bells, insiders say. "It's always this way with niche challengers," says Mark King, the former TaylorMade CEO, who was just promoted to run Adidas's North American business. "There's two points here, there's three there, and pretty soon that 3% for Under Armour turns into freakin' 30." Liedtke, Adidas's global brand chief, is even more candid. He says Adidas needs to "reset" everywhere, not just in the U.S. Evaluating the brand, Liedtke is as brutal as the critics, acknowledging that young athletes aren't looking to the three stripes the way they did a decade or two ago. "I think a lot of times we're not even in consideration," he says of sneaker shoppers. "That's what breaks my heart." Formerly based in Portland, Ore., as vice president of North American brand marketing, Liedtke moved to Germany in 2006 and last year became global head of the brand, a huge step up. The 48-year-old is rumored, as is the 55-year-old King, to be a strong candidate for the top job when Hainer is slated to retire in March 2017. (King says of Liedtke: "Whether he's the next CEO or not, that forward thinking, that we-need-to-push-the-envelope thinking—that's what he represents.") adidas Mark King (left) and Eric Liedtke are tasked with turning around Adidas's U.S. business. Photograph by Chris Hornbecker for Fortune Liedtke is now spearheading a massive reorganization that he says has this year directly affected 40,000 of Adidas Group's 54,000 employees. The company moved a handful of key executives from Herzogenaurach to Portland, including its global design chief. It demolished its old chain of command, a traditional hierarchy with heads of divisions reporting to managers. Liedtke eliminated 30 vice president positions and now has 16 people reporting directly to him. Previously, if, say, football cleats weren't selling well, he had to talk to six people to find out why. "Now I have one single guy responsible for winning football," he says. "And if he doesn't do it in the next 18 months, I have to make a change. Sorry, guys, but it's a performance culture now." Liedtke added sports clocks in meeting rooms to stress the theme of speed, a touch he picked up from Google GOOG -0.57% . He read up on Pixar's corporate culture. He brought two busloads of Adidas folks to Google in Zurich for a field trip. "We did it all very radically—we went faster than we've ever done before," says Liedtke. "There's going to be despair, there's going to be denial and complete frustration, and then there's awakening." One of the brand chief's biggest goals was borne out of his own frustrations. Having worked in both Portland and Herzogenaurach, Liedtke says it has often been "a huge divide." King concurs. Both men describe instances when German employees would complain about the Americans, and vice versa. In Liedtke's first visit back to Portland after relocating to Germany, he told employees to raise a hand if they had not recently complained about the Germans. No hands went up. "When you think of the Germans, think of me now," he told them. "I'm the guy. Do you picture me, or is it some 1944 reference? I'm the German guy now. There's no more bogeymen." Running the Wrong Way The problem hasn't been just one of comfort and compatibility. King blames that Euro-American culture divide, in part, for the problems in U.S. sports. He surmises that Adidas's strategy for years was to dominate soccer and assume that the halo of soccer would drive growth in other sports. That worked for a long time in other countries, but it hasn't worked in America—and isn't likely to. He volunteers the way he imagines past conversations went between execs in Germany: "American football? They only play that in America. Let's not worry about it. Baseball? Americans don't even like baseball anymore. Lacrosse? What's that?" Adolf "Adi" Dassler, a cobbler, founded Adidas in his hometown of Herzogenaurach in 1949. Before that, Adi had a shoe company with his older brother Rudolf. One of their first shoes was a track spike, famously worn by Jesse Owens in the 1936 Olympics in Berlin. In 1948 the brothers split, and Rudolf created rival Puma. Six years later the German men's team won the World Cup wearing Adi's cleats. Many consider it Adidas's true debut. With such pedigree, Liedtke is hardly off base when he calls Adidas the "original sports brand." It is, in Liedtke's I-can't-believe-my-dad-said-that phrasing, the Original Gangsta: "We are the OG. And kids respect the OG. So we need to tell people," he says. And yet instead of sports, many consumers in the U.S. associate Adidas with hip-hop culture. That dates back to 1986, when rap trio Run-DMC released the song "My Adidas." Before long, items like track jackets and the shell-toe Superstar sneaker were surging in popularity, prodding management in 2000 to split its apparel division into two segments: sport performance (athletic gear) and sport style (fashion, which includes Originals). Under the latter, it has partnered with designers like Jeremy Scott and Yohji Yamamoto, outfitted pop sensations like Katy Perry, and designed signature shoes with even little-known rappers like Big Sean and Pusha T. ADI.06.01.15.timeline Courtesy of Adidas "I think it's fair to say that sport has transcended into fashion, into lifestyle, into streetwear," explains CEO Hainer. "I would guess that 80% of all sold basketball shoes will never see a court. They are worn just to build status and be cool. So sport has a connection to lifestyle, which I think is good. Within Adidas, of course we want to benefit from that." But even with hitmakers like Kanye West and Pharrell, the strategy might be a dangerous one. For better or worse, it has redefined the company Adi Dassler built. Some analysts say that Adidas pushed Originals too hard. "You have to pick your lane and decide who you want to be," says Matt Powell, a widely followed apparel analyst with NPD Group. John Horan, founder of Sporting Goods Intelligence, puts it this way: "Think of it like a glass of beer. Your fashion business should be your foam. The performance business has got to be the beer. What they have is a lot of foam and not enough beer." Hainer acknowledges the company's recent fumbles on the sports side, but insists fashion isn't the cause. "If we might be seen in America as a hip-hop or street-fashion brand," he says, "it is not because we do too much hip-hop and celebrities. It is because we did not do enough sport." He adds forcefully that Adidas will always stay true to that heritage. "When you look at our new brand campaigns in America," he says, "this is sport, sport, sport!" Maybe so. But then the $500 Yeezy duck boot hits stores later this summer.

Adidas sets sights on Nike

Up to 80 Adidas employees have moved from Germany to Portland in the past year as the sportswear brand increases its emphasis on the American market, a company executive said Thursday. The goal is for that effort to get Adidas to 15 percent of U.S. sports footwear and apparel sales by 2020, said Mark King, president of Adidas North America. The brand's current share is in the mid-single digits. King was one of the presenters at the company's 2015 Investor Day at Adidas headquarters in Herzogenaurach, Germany, laying out financial goals for the next five years. King's presentation and other executives' remarks made clear the North American office, headquartered in Portland, will play a key role as Adidas tries to gain market share. "We want to be the best sports brand in the world," King told an audience of mostly stock analysts, noting that the United States accounts for 30 to 40 percent of industry sales globally. "We gotta be the best sports brand in America. It's imperative." Internationally, Adidas said it will increase profit 15 percent annually and grow sales at a high single-digit rate under the plan announced Thursday. The five-year blueprint replaces its predecessor, "Route 2015," announced in 2010 - goals the company declared unattainable last July. Also last year, Adidas took a step back in the United States as it fell into third place in the sales race, trailing Under Armour and Nike. Worldwide, Adidas is the second-largest sports brand, with about $15.85 billion in sales last year, a 2 percent increase from 2013. Through the first nine months of its current fiscal year, Nike had $22.8 billion in sales, 12 percent more than the previous nine-month span. The company had $30.25 billion in sales in its last fiscal year. Sportswear industry analyst Matt Powell of The NPD Group found Adidas' plans intriguing. "All the initiatives are good ideas but all will take time to implement," he said. "Having the right product solves a lot of problems." While other speakers mentioned Adidas' 50-year history and senior statesman role among all brands, King was having none of the nostalgia. "The reason we don't move fast is that we're stuck on the past," King said. "We can't be stuck on the past." That's all going to change with more shelf space in stores, a greater presence with professional athletes, faster product turnaround and higher visibility in key markets, said King, the former head of TaylorMade-Adidas Golf who began his new assignment late last May. Dick's Sporting Goods and Foot Locker have each committed to offering more shelf space for Adidas. "We will dominate soccer in 400 (Dick's) stores by next fall," King said, adding that the agreement for greater shelf space in the retailer was secured last autumn. "We will show up better in Dick's than ever before." King said the brand was building stronger relationships with other brick-and-mortar retailers, too. He singled out catalog and e-tailer Eastbay as a source of significant sales growth over the past year. Moreover, Adidas will open 55 of its own retail stores locations nationwide over the next 30 months while refurbishing or closing existing stores. And, while he didn't reference Nike by name at any point in his talk, the purpose of Adidas brand stores sounded similar to those played by several of Nike's locations. "When people walk through the door it's not a buying experience," he said. "It's a brand experience." King barely mentioned Adidas' decision, announced last week, to not pursue renewal of its apparel sponsorship with the National Basketball Association when it expires in two years. "If a league deal isn't going to drive our business," he said. "We're going to ... focus on our athletes." (Chief executive Herbert Hainer said later that the company walked away from the NBA deal because it was not resulting in increased footwear sales.) King said the brand is determined to sign more professional athletes to endorsement deals, noting that Adidas signed 21 of the participants in this year's NFL Combine. Also, he said the company will double the number of NBA players it has as endorsers, to 140. Previously, he's said Adidas will sign up to 250 NFL players and 250 Major League Baseball players. Also, he said Adidas, now outfitting 96 colleges, would increase that to 200 colleges in the next three years. Advertising will also play a large role in resetting the brand's image in the U.S., King said. Adidas announced earlier this month that it had hired the Los Angeles-based agency 72andSunny as its global creative ad agency. Adidas will run a steady stream of brand campaigns in the United States for the next three years, King said. He noted the previous campaigns have been characterized by a flurry of activity, followed by a lull. Despite it all, King acknowledged there will be skeptics about Adidas' ability to achieve its lofty goals. (One analyst, questioning King about his vow to more closely attune designs to consumer wishes, termed current offerings as "so shockingly terrible.") An analyst or two told him at lunch, "hey, you've had plans before," King said. "Well," King said from the stage, "you're just going to have to believe me, or you're just going to have to stay tuned and watch."

Adidas Vs. Nike Vs. Under Armour: Which for 2016? (NKE,UA)

Adidas AG, Nike Inc. (NYSE: NKE) and Under Armour Inc. (NYSE: UA) are three of the largest retailers in the competitive athletic apparel industry. Each company has carved out an impressive market share in a seemingly continuously growing and innovating industry. Overview of Adidas Adidas is headquartered in Herzogenaurach, Germany and trades as an American depositary receipt (ADR) in the United States. The company boasts a market capitalization approaching $19 billion and trailing 12-month revenues over $16 billion. The stock ended 2015 priced around $48 per share and with a price-to-earnings (P/E) ratio just over 8. The stock ended 2015 near its 52-week high, which was approximately $50 per share. It also yields a dividend around 1.8%. Adidas has a more established market in European countries. The Adidas Group also owns two other widely recognized names in athletics: Reebok and TaylorMade. While Adidas was initially known as a soccer brand, its ownership of these other brand names establishes it as a truly diversified player in athletic apparel and goods. Adidas expects to grow its top-line revenue by 15% annually through 2020. It plans to create this growth through investments to increase its speed of new products to market, which will allow the company to adapt more quickly. It also intends to invest strategically in marketing in growing urban cities across the globe, as the company recognizes the movement of population, particularly younger and more athletic segments of the population, to urban areas. Overview of Nike Nike is the largest company of the three and perhaps the one with the most brand recognition. Headquartered in Beaverton, Oregon, Nike has a market capitalization around $102 billion and trailing 12-month sales over $31 billion. Nike ended 2015 priced near $62 per share, which is at the upper end of its 52-week range of $45 to $68. Its P/E ratio is near 24, and it yields dividends of only about 1%. Nike is dominant across the globe; in particular, it maintains the largest market share in the athletic apparel industry in North America. The company has made significant efforts in recent years to repair public perception issues surrounding its labor practices in emerging markets. Its turnaround in the part of its business operations has been widely praised. Nike markets most of its products using the Nike name, but it also owns smaller niche brands, such as Jordan and Converse. Nike's goal is to grow its annual revenues to $50 billion by 2020. It intends to accomplish this by significantly increasing its direct sales and e-commerce revenues in developed markets. The company also sees significant growth opportunities in China and in its women-focused product lines. Overview of Under Armour Under Armour is by far the youngest of the three stocks, having gone public in 2005. While the company's growth during the past 10 years has been remarkable, it is still also the smallest of the three companies by any measure. Under Armour has a market capitalization around $15.5 billion and trailing 12-month revenues of $3.6 billion. The stock ended 2015 trading around $80 per share with a P/E ratio of approximately 40. As a younger growth-phase company, the stock does not currently pay a dividend. Under Armour's revenue and net income growth since its initial public offering (IPO) has been exponential, rewarding early investors with significant share price growth. Starting out with a niche in the American football market, famously selling moisture-wicking base layers, the company has consistently found ways to innovate products that penetrate mature markets. It tends to appeal to younger market segments, and it often prices its products at a premium for its perceived quality of innovative materials and designs. Under Armour projects to continue to compound its annual growth at a rate of 25% per year through 2018. Compared to Nike's size, Under Armour appears to have substantial room to grow. Under Armour projects substantial growth in footwear sales and additional income streams from more sales directly to consumers. The company will also continue to enter new markets, most recently hiring a talented team to begin a plan to enter the outdoor performance apparel market. The expectations are set high, but recent history would say not to bet against Under Armour's success. Competitive Dynamics Nike is the giant in the industry and perhaps has the most to lose. Its shares reached all-time highs in 2015, and its growth projections continue to be aggressive. Competitors like Under Armour will continue to innovate to attempt to steal market share away, and the younger generation of buyers may show signs of favoring smaller brands and more transparently sourced goods that they can obtain easily through online shopping. Adidas is entrenched in market segments domestically and abroad where it has significant brand loyalty relative to its competition. However, the company does not boast quite the same level of high-end sponsored athletes, which could harm its perceived values relative to the other two companies. Under Armour will no doubt be on the attack in years to come. It has paid top dollar for a lineup of world-class athletes across all major sports, which should continue to feed its perception of having some of the highest-performance, most-current and innovative apparel products. Under Armour has also acquired several fitness app companies, as it seeks to integrate mobile technologies to bolster its brand. Who to Buy and Hold in 2016 Despite the company's stability, size and growth, investors should steer clear of investing in Nike for 2016. Nike is a mature company, and its stock is hitting all-time highs. Those stock prices would seem to reflect its aggressive growth goals. If any of those goals waver, a stock price correction is sure to follow. While Adidas is also a mature apparel company, the pricing for 2016 appears attractive. Its P/E ratio is much more reasonable, and it pays a better dividend than Nike. Adidas is unlikely to experience exponential share price growth, but at its current price, it appears to be a sound investment for 2016. Under Armour is a pure growth play for 2016 and beyond. Naturally, much of this expected growth is evidenced by its share price and P/E ratio. However, the company appears to be investing in key areas that will bolster the brand in years to come. Although it would have been great to be a buyer several years ago, this stock still has significant more room to run up in share price.

Here's Why Adidas Is Scoring a Comeback in the U.S.

"Success starts from the feet up." Two years after stumbling badly in North America, Adidas says it is notching a big win in the competitive sports gear market. The world's second largest athletic-gear maker reported impressive first-quarter results to start off the year, with net sales rising 22% on a currency-neutral basis in North America from a year ago. That's a big increase from the 7% jump posted a year ago, and an even steeper turnaround from the 20% decline in 2014. The namesake Adidas brand fueled the sales jump, up 31% and offsetting some softness for the sibling Reebok brand. That growth outpaces the most recent results from top rivals Nike NKE 0.04% , which reported a 14% jump for its most recent quarter while Under Armour UA 0.03% posted a 25.7% increase in North America. Mark King, president of Adidas Group North America, tells Fortune that there are several reasons why the brand is resonating again. Footwear sales soared 54%, helped by increases for running and the smaller baseball and football categories. "Success starts from the feet up," King explains. He said for running, which grew by 30%, the Ultra Boost line was an especially strong seller. Retail data from The NPD Group also indicates Adidas is growing faster than Nike and Under Armour within running, though it is important to note that Nike still commands nearly 60% of the market share (while Adidas only has 5% and Under Armour just 3%). Broadly, brands are benefiting from increased interest in sports gear-worn not only for working out but for day-to-day activities. Athletic gear should continue to outperform the broader apparel/footwear market this year as the Summer Olympics give Adidas, Nike, and others even more marketing opportunities for their brands. The sales success has led to some copycats, most notably from fast-fashion chains, and in the category's strength hasn't always extended to retailers. Most notably, Sports Authority has struggled. King says he isn't worried about the bankruptcy of Sports Authority and a few other smaller, regional sports gear retailers. He says Adidas still has strong support with Dick's Sporting Goods DKS -0.99% , Foot Locker FL -0.39% , and other key retail partners. Adidas added 700 branded space across retail channels last year and is planning to increase its presence by an additional 1,100 this year. That means Adidas will have a greater retail presence than ever before. Also helpful: partnerships with rapper Kanye West and other influential artists that help elevate the "cool" factor. While those relationships don't drive a ton of product volume, they create a halo effect. There's also been some big notable athlete endorsement deals that King called out, including deals last year with NHL Pittsburgh Penguins star Sidney Crosby and NFL Green Bay Packers quarterback Aaron Rodgers. "Americans like winners, we needed to not just have athletes but the best athletes," King says.