As per Morgan Stanley analysts, Adidas AG and Nike Inc. are currently at crossroads, with Adidas continuing to slowdown and Nike starting to regain market share. The research group’s analysts issued separate company reports that together show how one company’s market share loss is expected to result in the other brand’s gain.
Analyst Elena Mariani in the UK has downgraded Adidas to “Underweight,” noting that the market is underestimating both the cyclicality of the company’s business model and stronger competition from peers. And while the company is better now than it was five years ago, Adidas’ topline profile is more exposed to fashion risks given what has been a stronger push into lifestyle products.
With growth normalising over the last two quarters and growth in footwear down to the single digits after three years of double-digit growth, the analyst believes the current product cycle might be coming to an end for the company. And with the current sport-inspired styles contributing almost 50 percent of sales versus just 20 percent 10 years ago, The company might find it hard to replace the brand’s most successful styles.
In contrast, any market share loss from Adidas is likely to benefit Nike, according to analyst Lauren Cassel in New York. Her thesis is that Nike’s new product pipeline continues to resonate with consumers, and a Nike bull case can be made via its capture of Adidas’ lost share through Nike’s direct-to-consumer channel.
