What's going on?
Adidas – the world’s second biggest sports company – had its investors cheering on Thursday with strong second-quarter results. It hit the back of the net with its shares rising 9%. Goooaaal!
What does this mean?
The football World Cup and demand for new Adidas products (like its “Continental” leather sneakers) helped to boost sales by 10% in the second quarter (excluding the effect of currency swings). So it’s not just divine intervention from Yeezus that’s helping to grow the business.
Adidas also managed to grow profits by 20% while making a ton of marketing investments (the summer’s filled with big sporting events, which are a massive marketing opportunity for sports brands). The secret? It managed to persuade more of its customers to check out through its higher-margin online business.
Why should I care?
For markets: Adidas is creeping closer to Nike.
There’s a long-standing battle between the two sporting goods behemoths, Adidas and Nike. Adidas has been playing catch-up for a long time, mainly in the US after it turned down the opportunity to sponsor Air Jordan in 1984. (It subsequently bought Reebok in 2006, which hasn’t been a smooth ride – its value was written down on Thursday as part of a messy takeover.) However, Adidas has been enjoying a golden spell under its new CEO. It’s now growing quicker than Nike in the US, keeping pace in China, and maintaining a strong foothold in Europe – all of which is giving investors reasons to keep buying those shares.
The bigger picture: Changing long-standing CEOs can lead to a good result.
Before its new CEO stepped in, Adidas’ previous boss had been in charge for over a decade – and despite growing the business, the titan’s share price had lagged the market. A fresh face, with some new ways of thinking, has helped to propel Adidas to new heights. Other companies might be taking note (Pandora’s CEO announced he’s stepping down following Tuesday’s poor outlook).