In a surprising turn of events, Adidas appears poised to capitalize on rival Nike's recent missteps, with analysts projecting strong second-quarter results for the German sportswear manufacturer. The resurgence of Adidas' classic Samba and Gazelle models, coupled with Nike's unexpected forecast of declining annual sales, has set the stage for a potential shift in the sportswear landscape.
Adidas also appears to have successfully navigated the financial fallout from its Yeezy partnership termination, with recent sales of remaining inventory contributing an estimated 400 million euros to its 2023 revenue, helping to offset initial losses. Industry experts anticipate Adidas will report its highest profit margin in three years, with analysts projecting 51.4 percent for Q2, according to LSEG data. Revenue is expected to climb 4.5 percent year-on-year to 5.6bn euros.
This positive outlook stands in stark contrast to Nike's recent lackluster performance and the momentum new brands such as On and Hoka are having. The divergence in fortunes between the two sportswear behemoths reflects broader industry trends. Nike is off its game in terms of product and message, while Adidas is having a moment.
In 2023, Nike was rated in 9th place in the world’s most iconic brands, according to Interbrand. Adidas came in at number 42, showing Nike’s strength cannot easily be surpassed. Yet in terms of products, Adidas' popularity can be attributed, in part, to its strategic focus on classic models. The company has successfully revitalized its Samba and Gazelle lines through new colorways and limited editions, tapping into a growing consumer appetite for retro aesthetics.
While Adidas' short-term outlook appears promising, analysts caution against overoptimism. The sportswear industry continues to face headwinds, including weakened demand in China and intensifying competition. As Nike grapples with its challenges, some Wall Street analysts are even speculating about potential management changes ahead of the company's autumn investor day. Adidas is expected to release its H1 2024 results on July 31st.
