What's going on?
Adidas – the German sportswear maker with the name that everybody pronounces wrong – cut its sales forecast for the year on Wednesday, and its stock slipped and fell 4%.
What does this mean?
The world’s second-biggest sportster reported sales growth of 8% in the third quarter, just shy of expectations, but better profit than predicted: up 19% on the same period last year. Currency headwinds and higher costs for raw materials were offset by stronger margins, as Adidas sold a greater proportion of its wares directly over the internet and through its own stores rather than via retailers, which take a cut.
But Adidas is changing its stripes for the rest of the year, saying that it expects lower sales than previously forecast, albeit with higher profit. Western Europe’s to blame – stiff competition and Brexit gloom left some Stan Smiths on the shelf, literally.
Why should I care?
For markets: Stripes vs. Swoosh.
Adidas’ long-standing nemesis, Nike, is gaining momentum in North America again. Up until 2018, Nike was losing Air – but the company raised the bar last quarter, growing 6% in North America. Adidas US grew 16% in the same period, and is generally more popular with snake people (a.k.a. millennials) than Nike. Nevertheless, some are worried that the return to growth of the US’s most valuable fashion brand will give Adidas blisters. Meanwhile, newly unchained Puma is hot on the heels of both companies…
The bigger picture: Europe’s not the be-all and end-all.
Western Europe makes up just 29% of Adidas’ global sales, and the company’s growing faster in North America and China; throw in a dash of international ecommerce, and Europe will likely become less important to Adidas in the future. China’s sports industry is exploding, with the government pushing sport and health hard. And Chinese millennials – of which there are 415 million, compared to the entire European population of 743 million – are lapping it up.