Adidas AG (ADDYY) is bouncing back from a difficult 2015. The sporting apparel giant had seen revenues sliding for the better part of last year before making major changes in its marketing and sales strategies. After losing out on several major deals and struggling to compete with other major players in the industry, Adidas was on the ropes. The fourth quarter saw the company reverse the trend and finish strong in the final quarter, giving shareholders new optimism and providing Adidas enough confidence to boost forecasts.
Adidas has benefited from a recent shift in their sales strategy, aiming more at the upscale market and creating deals with trend-setting celebrities in order to create a more premium experience. The company has also been aggressive in seeking partnerships with major sports brands, including Premier League powerhouse Manchester United, in order to increase their exposure. The moves have already begun to pay off, as the fourth quarter is looking to be a major improvement over the rest of the year with 2016 shaping up to be a big year.
Challenges In the Rear View Mirror
Adidas started 2015 with a string of bad news. The company’s sales were in a tailspin and currency losses were piling up against revenues. Additionally, Adidas was faced with increasingly stiff competition from both of the other major players in sports apparel—Nike (NKE:NYSE) and Under Armour (UA:NYSE). Adidas mostly struggled in US markets, where they lost ground to both companies in terms of sponsorship deals. Under Armour snatched away several high profile university contracts—most notably Notre Dame and the University of Wisconsin—while Nike nabbed the University of Tennessee and Michigan.
The company has seen a clear erosion of its market share over time, losing serious ground to Nike in the past five years.Over the last several years, Adidas’ 6.00% of total footwear sales in the US ranks a distant third to Nike’s lion’s share of 68.00%. A byproduct of weak US volume was the loss recorded in the last quarter of 2014 before the subsequent quarters in 2015 showed modest improvements on the back of a weakening Euro.
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