Life has changed since we started a forced isolation in March 2020. Even in the way we dress: oversized hoodies, wide jeans, pyjama-like tracksuits. Not to mention the online workouts dodging living room furniture. Sales in yoga mats and fitness gear are on the rise. How has this affected sports clothing and equipment producers? Let’s check it out with one of the worldwide biggest brands of the Athleisure wave: Adidas.
The origin of Adidas date back more than a century ago. You’ve probably heard of the story of two German brothers who run a shoe factory in Bavaria. They got Olympic athletes, who won medals in Amsterdam 1928 and Berlin 1936, to wear their shoes and became known all over the world.
After the Second World war, the relationship between the brothers wasn’t good, so they split the business and created two distinct brands. In 1949 Adi Dassler registered his company, Adidas, naming it with the first letters of his name and surname, and devised the famous 3-stripe logo. His brother Rudolf Dassler, on his side, founded Puma.
Thanks to the decisive role of their cleated shoes in Germany’s 1954 World Cup victory, they got to be iconic in the football world. They are also responsible for the classic black and white icosahedron pattern football ball, called Telstar, developed to help the TV cameras to follow it. Later they started producing clothes for very different sports, researching the needs of the athletes. In the ’80s hip hop artists like Run-D.M.C. started that fetish obsession with sneakers that continues to these days and makes your friends spend €250 on their 25th pair.
In 2006 Adidas acquired Reebook, a US brand –originally British– that reached its peak with the step aerobic trend in the ’80s –visualise Jane Fonda in colourful outfits. This decision was meant to expand their position in the US and challenge their biggest rival, Nike. However, after 15 years of working on revamping it and increasing its value, this year they have decided to separate ways and focus on Adidas’ growth.
The German company just launched a five-year growth strategy plan which mentions e-commerce and sustainability as its main targets. After the dramatic drop in sales during the first months of the lockdown, they have rapidly increased their online sales and the forecast says that they’ll go back to the levels of 2019.
The sports clothing industry is very competitive by nature. Adidas is the second biggest, but the clear worldwide leader is Nike –especially in North America–, with a market capitalization that goes up to $214 Billion. Adidas has a market cap of $55 billion approx. and is more established in European countries.
Nike is already a giant that keeps pushing, while Adidas seems to still have more potential room to grow, according to some investors. Not to forget that there are quite a few strong competitors to divide the cake, like Lululemon, Puma or Under Armour.
There are other factors that can move share’s prices. Big textile companies have a controversial reputation regarding their misuse of natural resources in their production and unethical labour practices in emerging markets. As awareness is growing in the last years, many brands seem to be working towards more sustainable standards.
The United Nations reported recently that there are more than a million people in internment camps in the Chinese region of Xinjiang. In this area, 20% of the world cotton is produced and it may be forcibly collected by Uyguhr workers, a minority ethnic group. Companies in the Better Cotton initiative, like Adidas and H&M, decided to review their supply chain and discontinue using cotton from this region. In response, the Chinese government has launched a boycott campaign against these companies, which has led to a drop in their sales in the country.
Adidas can be an interesting investment. If you bet for it, your gains would mean that in the future dressing up in a tracksuit is not going to be exclusive to the trap singers scene. Also, if the word ‘sustainability' is not just an advertising claim, hopefully more sportswear will be made of recycled materials and manufactured in a more respectful way with the environment and working rights. And maybe the trefoil may gain ground on the swoosh in the US.
In any case, it’s good to have a look at the whole situation to guess the best moment to invest. By the way, summer is close. The question now is: Adiletten with socks, aye or nein?
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