adidas

The sporting goods industry is expected to grow + 6-7% per year over the next few years, driven by secular trends:

• Athleisure: a global fashion trend toward casual dress
• Health & wellness: growing awareness on improving health and quality of life

adidas is a strong brand in the design and distribution of sporting goods, (i) #1 in Europe and #2 worldwide and (ii) supported by strong innovation capability throughout multiple sponsorship agreements and partnerships.

There is potential for growth in sales, mainly supported by:

• Recovery after industry-wide challenges including supply chain disruptions, elevated inventory levels and Covid-19 lockdowns in China
• Omni-channel approach: strong sales dynamics from both third party distribution (wholesalers) and a Direct-to-Consumer model (e-commerce and own stores)
• The increasing share of sport-inspired lifestyle products in adidas’ product range
• Balanced growth across all geographies outside of China (reduced exposure to China and strong growth in markets that represent more than 80% of the business)
• The US, where further market share gains are possible
• Speed initiatives: clear objectives to reduce time-to-market

Potential for EBIT margin improvement is driven by (i) channel mix optimization, (ii) cost efficiency/overhead optimization, mainly through economies of scale and (iii) increased profitability in the US. The company's focus lies in margin preservation/recovery in the current inflationary environment and after the termination of the Yeezy partnership.

adidas has a solid balance sheet and cash conversion.