Adidas: Better Than Nike

Summary

  • Adidas reported successful earnings results for Q2, as all of its major metrics were up Y/Y.

  • At the moment, Adidas has one of the best gross margins in the sportswear industry among large-cap companies and a lot of potential for growth.

  • I believe that Adidas is a much better investment than Nike or other company from the industry.


The rivalry between Adidas (OTC:ADDYY) and Nike (NYSE:NKE) has been going on for decades, as both of those sportswear companies own a sizeable market share of the overall sports apparel and accessories market. On Thursday morning, Adidas announced its earnings results for Q2 that were positively accepted by the market, as its stock is currently trading higher to the Wednesday closing price. With a solid performance during the quarter and a positive outlook, I believe that at the moment Adidas is the best sportswear company to own and, unlike Nike, its US sales have been on the rise in the last few quarters.

Going through the earnings report for Q2, there are a couple of things that I would like to discuss. First of all, Adidas announced that it managed to get a double-digit growth in most of the markets in which it competes, including the US and China. The sales in the Greater China region alone have increased by 27% Y/Y, while the North American sales were also up by 16% Y/Y. This shows us that Adidas managed to more efficiently use its resources in those regions, while Nike has been struggling on its home turf for a few months now and only in the recent quarter showed a positive dynamic growth there.

The revenues during the period for Adidas were up 10% currency-neutral, but due to the strong dollar the revenues in euro terms were up only 4% Y/Y. One of the main catalysts of growth was ecommerce, as its revenues increased by 26% on an annual basis, primarily thanks to the company’s ability to attract new consumers through its own mobile app that already has millions of downloads

As for the gross and operating margins, they increased by 2.2% and 1.2% to 52.3% and 11.3%, respectively. It is a known fact that margins in the apparel business are much lower in comparison to other industries, but Adidas still manages to efficiently make, distribute and sell its products, as its gross margin is also higher by around 10% in comparison to Nike. In addition, the recent World Cup that was being held in Russia this Summer, definitely helped Adidas to establish a stronger presence in the sportswear industry, as its ball Adidas Telstar 18 has been chosen as an official ball of t he tournament and the company has also outnumbered Nike in terms of shirt deals 12 to 10.
https://seekingalpha.com/article/4198047-adidas-better-nike

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