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Adidas, Under Armour Head in Opposite Directions

By bob mcgee– august 7, 2017
Photo Credit: Frank James

For the Three Stripes, momentum is continuing to build in North America where the brand has expanded brick-and-mortar distribution in Foot Locker and Dick’s by 400 doors this year and it is focused on hitting the 5 billion euros revenue mark by 2020. Still, the company says it needs to see more growth from its apparel.

At Under Armour, meanwhile, CEO and Chairman Kevin Plank talked about the company having more flexibility going forward as he announced a pre-tax $110-130 million restructuring this FY that includes laying off 2 percent of staff and a dropped FY revenue growth projection to 9-11 percent from 11-12 percent due to a tougher North American business.

Adi’s second quarter North American results were highlighted by 33 percent currency-neutral growth in the Adidas brand that included double-digit gains for running and training and 30 percent growth in women’s. Reebok’s N.A. revenues fell 16 percent as the label focuses on more profitable growth and less on its outlet store network. CEO Kasper Rorsted told analysts that Reebok “is a long-term project” for the company.

Adidas raised its FY17 revenue guidance by nearly 1 billion euros on continued strong demand for its products. The company’s ecommerce revenues climbed 66 percent in the period and more products will be allocated to that channel going forward. As for the U.S., Rorsted confirmed the Adidas brand has been heading in the right direction for three years but also declared “there is no indication of a quick fix” for the market where the company will continue to overinvest in order to further build momentum.

Plank, meanwhile, told analysts that Under Armour under new President and COO Patrik Frisk will be working on a stronger go-to-market strategy, better management of supply and demand with an evolving distribution model and on “becoming smarter to ensure that resources are aligned and leveraged strategically.”

At this juncture, the looming question is whether Under Armour’s corporate reset can happen fast enough to slow the momentum of its larger rivals in Adidas and Nike.

Elsewhere, Asics Corp. reported a 17 percent decline in second quarter operating income to $145.6 million last week on total revenues of approximately $1.85 billion. Sales in the American region declined 6 percent to about $504.2 million on weak U.S. sales. Segment income was up more than 394 percent to $32.1 million on an improved cost of sales ratio, a delaying of expenses to the second half and an allowance for doubtful receivables.

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