Adidas is riding high on success of low-rise multi-colored Samba and Gazelle sneakers, along with weaker sales at rival Nike. Adidas surpassing Nike, should help the German sportswear brand deliver strong Q2 sales and its biggest profit margin in three years. Nike forecast a surprise drop in annual sales at the end of June, adding to investor worries about the sportswear giant falling behind established peers and newer rivals alike.
Adidas surpasses Nike,
Nike shares fell as much as 20% on the news, but shares in Adidas – which usually track the U.S. company’s moves barely reacted. Investors are suggesting that Nike’s weakness is seen as an opportunity for Adidas.
“Nike, in terms of product and message, is very much off its game and Adidas is having a bit of a moment,” said Simon Irwin, retail and sporting goods analyst at Tanyard Advisory.
As Nike’s woes continues, Adidas’s’ resilient performance has caused many to view Nike’s current weaknesses as a golden opportunity for Adidas to continue with its success and shine brighter in the market.
Adidas’s success as Nike struggles
As competition is increasing and with Nike being less innovative than in the past, providing retailers with a wider range of brands to choose from, said Cedric Rossi, next-gen consumer analyst at Bryan Garnier.
“There is really a huge contrast between what’s going on at Nike and the rest of the industry,” he added.
Nike said in late June it would roll out new $100-and-under sneakers around the world as it aims to get sales back on track.
Adidas’s growth
Adidas continues to captivate consumers with its vibrant and limited edition three-striped shoes, bolstering demand and online searches. LSEG data forecasts a 4.5% revenue increase for Adidas, reaching 5.6 billion euros. While the profit margin is expected to hit a three-year peak of 51.4%.
Adidas capitalizing on its success
Smaller brands gaining market share and Nike pivoting to direct-to-consumer sales present opportunities for Adidas. It is seizing by strengthening its wholesaler relationships under CEO Bjorn Gulden. The upcoming Euro 2024 soccer tournament is expected to further boost sportswear demand in Europe, providing Adidas an edge. Adidas has renewed focus on sports and strategic market positioning. This will enhance Adidas’s profitability and market presence. Though challenges in China and increased competition could temper high margin aspirations.
Stock update
Nike share price closed at €72.46 down 0.81% and Adidas stock closed at €216.10 down 1.23% today.
