Adidas Is Giving Nike A Run For Its Money

Nike and Adidas are two of the largest footwear companies in the world. Effective marketing strategies and innovative products have helped these companies outperform the broader apparel industry over the last couple of years. Trefis captures trends in key operating metrics for Nike vs. Adidas in an interactive dashboard, highlighting how Adidas has been able to close the gap on the market leader over recent years through an increased marketing spend. Additionally, you can find more Trefis Textiles, Apparel and Luxury Good Industry Data here.

Nike’s revenues exceed Adidas’ by 50%, but Adidas has reported strong revenue growth over recent years

• Nike has added roughly $6.7 billion to total revenue since 2015, increasing at an average annual rate of 6.5%. On the other hand, Adidas has been able to add roughly $7 billion to total revenues, growing at an average annual rate of 11.3%.
• However, Nike is notably bigger than second-placed Adidas. Nike’s total revenue in 2018 stood at $39 billion – almost 50% more than Adidas’ $26 billion.
• This growth has been led by the apparel and footwear segment which have continued to achieve robust growth in the last couple of years driven by continued global trends such as increasing penetration of sportswear, rising sports participation rate, and increasing health awareness.

Nike’s revenue growth since 2015 has averaged 6.5%, as opposed to growth in excess of 11% for Adidas

• Although, Nike and Adidas have added roughly $7 billion to total since 2015, Adidas’s growth has come at a 70% faster rate than Nike.
• Adidas’ growth has been led by its footwear segment which has continued to achieve double-digit growth driven by sales increases in sports-inspired and sport-performance products.
• However, both these apparel companies have continued to outperform the industry. Athletic footwear has continued to a be a strong driver for these companies, led by higher demand for various casual and running style.
• Moreover, global e-commerce growth has boosted the top line for both companies, with both of them achieving more than 35% growth in their digital business in 2018.

Adidas did particularly well to grow its Footwear revenues over 2015-17, although Nike’s efforts to regain lost ground yielded results in 2018

• Adidas footwear has added $5.8 billion to total revenues since 2015, growing at an average annual rate of 17.6%. while Nike could only add $4.3 billion at an average rate of 6.8%.
• Adidas has comfortably outpaced Nike’s growth in the last couple of years, with Adidas’ offerings such as Adidas Neo and Originals receiving positive customer response. Moreover, Adidas has been able to adapt itself better to changing customer tastes and preferences.
• However, there is still a huge gap between Nike’s and Adidas’ footwear revenues. As of 2018, Nike’s footwear revenue of $24.2 billion was roughly 60% more than that of Adidas’ $15 billion

Adidas’s strong growth over recent years can be attributed to its increased marketing spend

• Adidas has been more aggressive in marketing its products. As of 2018, Adidas’ marketing expenditure stood at $3.5 billion- representing roughly 14% of total revenues.
• On the other hand, Nike’s marketing expenditure of $3.8 billion was higher than of Adidas but represented less than 10% of Nike’s total revenues.

How does Nike’s Profitability compare to that of Adidas?

• As of 2018, Nike’s net income of $4 billion was almost double Adidas’ $2 billion. Moreover, Nike’s net income margin of 10.3% was roughly 30% more than Adidas margin of 7.8%
• However, since 2015, Nike’s net income margin has declined while Adidas, led by strong revenue growth has been able to steadily increase margins

Comparing Nike’s Market Capitalization to that of Adidas

Market Capitalization: Price per share x Shares outstanding as per latest annual filings

• Nike’s market capitalization as of July 2019 stood at $140 billion – more than double to that of Adidas’ $65 billion.

Conclusion: Nike has a larger scale and generates more profits, but Adidas is closing the Gap

• Nike has a larger scale and better profitability than Adidas, but the latter seems to be closing the gap over the last few years – as evident from Adidas’ strong revenue growth and aggressive marketing expenditure
• That said, both Adidas and Nike have expanded the scale and scope of their operations over time by adding new brands.
• They have also launched effective buzz marketing campaigns with both innovative products and celebrity endorsements and collaborations.
• Nike and Adidas have outperformed the other apparel, particularly, footwear companies in the past few years and we expect this trend to continue over the foreseeable future.

Per Trefis, Nike is likely to report an EPS of $2.98 for the year. This EPS figure coupled with a P/E multiple of 30x, works out to a price estimate of $89 for Nike’s stock (shows cash and valuation analysis), which is roughly 10% ahead of the current market price.

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