adidas

The sporting goods industry is expected to grow + 5-7% annually 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, #2 worldwide with (i) growing brand heat, (ii) strong innovation capabilities and (iii) multiple sponsorship agreements and partnerships.

Sales growth potential in the mid- to long-term is mainly supported by:

• The increasing share of sports-inspired lifestyle items in adidas’ product range
• An omni-channel approach encompassing strong sales dynamics from third-party distribution (wholesalers) and a Direct-to-Consumer model (e-commerce and own stores)
• Balanced growth across all geographies
• The US and China, where market share gains are possible

The company’s current focus lies on top-line growth while improving margins. Key drivers for potential EBIT margin improvement are (i) more favorable product and geographic mix and (ii) cost efficiency/overhead optimization, mainly through economies of scale.

adidas has a solid balance sheet and strong cash conversion.