It’s been a bad year for German sporting-goods company Adidas DE:ADS +1.66% ADDYY +1.18% . Its stock has lost more than third of its value this year. The company’s profit and outlook have disappointed. It’s reportedly faced pressure from activist investors seeking ouster of long-time Chief Executive Herbert Hainer.
The contrast is particularly glaring against the performance of larger rival Nike Inc., whose shares on Friday closed at a record after the company beat analysts’ expectations on quarterly earnings.
While Adidas shares climbed on Wednesday after the company promised to buy back up to 1.5 billion euros ($1.9 billion) in shares over the next three years, the company will need to do more to appease investors, analysts said.
“Higher cash returns would have been one (of) the possible requests from a potential activist shareholder,” said J.P. Morgan analyst Chiara Battistini. “On the other hand though, the road to full recovery might turn out to be longer than activists may hope for and enthusiasm might fade in the medium term, once the noise quietens down and all eyes turn back to the underlying progress of the turnaround.”
Here are some of Adidas’s problems:
In Western Europe, Adidas’s home turf, Nike’s NKE sales, excluding currency shifts, jumped 25%, versus 13% for Adidas.
In the key U.S. market, Adidas’s share in the key basketball, running and casual athletic sneaker categories have all declined or stayed flat so far this year while Nike has gained share, SportsOneSource data showed. Adidas’s Reebok brand lost market share in the training and fitness shoe category, and Adidas also lost ground in apparel, while smaller rival such as Under Armour UA +0.05% gained market share.
Nike has even stolen Adidas’s thunder in soccer, where the German company has long been the global leader. While Adidas was the official sponsor of this year’s World Cup, Nike’s commercials generated more online shares, according to social video-marketing firm Unruly. Nike said last week that more players wore its soccer cleats during the World Cup than any other label.
“Adidas and Reebok have suffered from not having enough U.S.-specific products,” said SportsOneSource analyst Matt Powell. “The U.S. is the largest sneaker market in the world. The U.S. consumer requires specific products. Products designed for other markets are not successful here.”
To up its game, Adidas has poached three designers from Nike and recently announced its plan to open a creative design studio in Brooklyn early next year. That could counter one theory about its woes, that having its headquarters in the small Bavarian town of Herzogenaurach makes it harder to attract top design talent.
But some analysts don’t buy that explanation.
“Adidas is not losing share because its headquarters is in a sleepy town,” said Hedgeye analyst Brian McGough. “If anything, we’d argue that its town is sleepy because the company is failing to drive the culture of the company. Nike is crushing it, and it’s based in Beaverton, Ore. — not exactly a cultural mecca. Adidas’s problem goes far beyond where people hang their hat.”
