Adidas appears to benefit from the downturn at rival Nike: it seems to recover from a tough period and expects solid second quarter results with the highest profit margin in three years. The contrast with Nike is stark: the latter recently predicted a fall in full-year sales and is trying to rebuild burnt bridges.
Back again
After the fiasco with Yeezy, things are finally looking better for Adidas. Its Samba and Gazelle trainers are suddenly very popular again, thanks to new colours and limited editions. Online searches for “Adidas Samba” have soared worldwide over the past twelve months, even surpassing searches for “Nike Air Force 1”.
Analysts expect the German sportswear giant to report a 51.4 % profit margin for the second quarter, the highest in three years, and a 4.5 % rise in revenue to 5.6 billion euros.
Back into wholesale
In contrast, Nike has lowered its outlook for the upcoming financial year 2025, following disappointing results in the fourth quarter of its financial year 2024. The sports fashion brand now expects sales to fall 5 %, with a decline in the high single digits in the first half of the year.
Nike appears to be less innovative than before, but even worse: its direct-to-consumer strategy is backfiring. In what must have seemed like an excellent idea at the time, the sports giant made a big deal of cutting ties with quite a few sales partners since 2018, such as Foot Locker and Amazon. However, the company is now backtracking on that: it has reinstated former CEO Tom Peddie to strengthen wholesale relationships, ties with Foot Locker have been reestablished and there is even already plenty of speculation about a return to Amazon. Wholesale sales were up 8 % in the fourth quarter.
More competition
One drawback of the withdrawal from many stores was that Nike inadvertently opened the door to smaller brands. The void left by Nike was eagerly filled by emerging labels such as Hoka, Lululemon, New Balance and On Running, which together had a 35 % market share in 2023.
So while Adidas is now benefiting from Nike’s weakness, challenges remain in the market. Demand in China remains weak and competition is increasing. Analysts also warn that the “golden days of very high margins” will not return soon, despite major sporting events such as Euro 2024 and the Olympics undoubtedly boosting demand for sportswear.
