Adidas (ADDYY) reported Q3 ’17 sales those rose 9% YOY (to $6.6 billion) and profit that increased 30% YOY (to $610 million), driven by growth in China (+28%) and the North America (+31%). The company experienced double-digit growth within its running and outdoor categories and with its Adidas Originals and Neo fashion lines. CEO Kasper Rorsted reiterated full year sales (+ 17%-19%) and income (+26%-28%) forecasts, which the company raised back in July, and said he is “quite optimistic” 4th quarter growth would outperform previous years.
Howie Long-Short: Performance footwear may not be “in style”, but there seems to be some momentum with sales of running shoes. Adidas’ running category experienced double-digit growth during the 3rd quarter and Brooks Running, which creates sneakers for avid runners, grew its revenue 14% during the same time. The Berkshire Hathaway subsidiary now generates 30% of its revenue from e-commerce sales, has expanded in to China and Brazil (after showing success in Europe, Japan and Canada) and is working to grow brand awareness within a younger demographic (25-35). I like what BRK.A is doing with this niche footwear brand.
Fan Marino: ADDYY has released a highly personalized new app that includes a custom news feed, chatbot (to answer questions) and full online store; with Joseph Godsey, global head of digital commerce saying the personalized experience is “meaningful enough” to bring consumers back. Perhaps it is, e-commerce sales grew 39% during the quarter. It had better be if the company is to hit its goal of $4 billion euros in e-commerce sales by 2020; the company only reached $1 billion in online sales in 2016.
Adidas reports strong growth in North America, China
Editor Note: The summary for this story was co-written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.
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Berkshire Hathaway’s (BRK.A) Russell Athletic has decided to exit the team uniform business (primarily HS and youth leagues) and turn its focus towards a “longer-term, more-healthier place” in consumer retail. A new line of “heritage” styled lifestyle and streetwear clothing, to be launched at Barney’s before to being sold at retailers like Urban Outfitters, will be a part of the company rebrand. A partnership with S&S Activewear (3rd largest U.S. distributor) provides the company with access to previously unreachable corporate and promotional business. Russell plans to maintain its team channel; selling non-uniform items and using S&S Activewear to service those sales.
Howie Long-Short: There is certainly some cache surrounding the “heritage” market, with companies like Champion (HBI), Fila USA (KRX: 081660) and Calvin Klein (PVH) experiencing recent resurgences. HBI reported Champion Q2 ’17 revenues were up 7%, with Fila USA and Calvin Klein up 11.5% ($71.3 million) and 8% ($786 million) respectively, over last year’s figures. It’s been 20 years since Russell Athletic has been relevant, but if you wait long enough, everything comes back into style.
Fan Marino: For those too young to remember, Russell was the largest marketer and manufacturer of athletic apparel in to the early 1990s; when Nike (NKE), Adidas (ADDYY) and Under Armour (UAA) began to pump big dollars into D-1 athletic contracts. Just 2 programs remain with the once dominant brand, Georgia Tech and Southern Miss, both of which have contracts ending with the company in 2018. There has been no word on if their new suppliers will offer cut-off jerseys, the signature look from Russell’s heyday.
Russell Looks To Build On Retail Momentum
Georgia Tech University has announced a 6-year deal that will make Adidas (ADDYY) the official apparel provider for 17 GT varsity sports. The partnership, which goes into effect on July 1, 2018, will replace the school’s existing deal with Russell Athletic (BRK.A). The mutually beneficial agreement provides Adidas with a presence in the Atlanta market, while providing GT with a boost in revenue and a significant improvement in apparel quality.
Georgia Tech to exchange Russell Athletic gear for Adidas starting in 2018
Howie Long-Short: When GT first signed on with Russell Athletic in 1992, sporting goods companies like Russell (BRK.A), Rawlings (NWL), Wilson (HEL: AMEAS) controlled the uniform market. 25 years later fashion and apparel retailers (NKE, ADDYY, UAA) dominate the space. Times have changed!
Fan Marino: You hear a lot of talk that GT’s relationship with Russell Athletic has damaged their recruiting efforts. I’m not buying that. Football struggles to recruit because they run a version of the wishbone offense that hasn’t been popular since the 1980s. Basketball can recruit. Josh Pastner has a 5 star, Nassir Little, on campus this weekend.