No margin for error as Adidas CEO bets on U.S. game plan

Wed Mar 1, 2017 10:15am EST
 
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By Emma Thomasson

BERLIN (Reuters) - Adidas is expected to redouble its U.S. efforts when Kaspar Rorsted spells out his strategy next week, potentially allowing the new CEO to set an ambitious profit margin target.

Much hinges on whether the German sportswear firm can keep up the momentum in the U.S. market, where its Superstar sneaker was the top selling shoe in 2016, ahead of nine Nike styles, according to data from market intelligence firm NPD.

Top U.S. sportswear retailers suggest that Adidas is doing a good job of lining up a pipeline of new styles, with Edward Stack, chief executive of Dicks Sporting Goods, saying that Adidas will get more space in his stores in 2017.

Dick Johnson, chief executive of Foot Locker, said last week that Adidas was leading growth of lifestyle running shoes, with its NMD, Boost, AlphaBounce, Tubular Shadow and Yeezy sneakers designed by singer Kanye West all selling well.

Helped by a big increase in marketing spending and the popularity of retro styles like Superstar, Adidas more than doubled its share of the U.S. athletic footwear market to 10 percent in January, according to NPD, with Nike steady at 45 percent and Under Armour falling.

"The momentum is still there in the U.S. There is more room to grow," said Scilla Huang Sun, a fund manager at GAM, who has built up her position in Adidas and cut her stake in Nike.

German rival Puma has also been enjoying a revival in the U.S. market, helped by a shift towards retro styles and away from basketball shoes which has hurt Under Armour and dampened Nike's success.

Although Adidas shares have almost tripled in two years as it has taken market share, that has yet to feed through into a significant improvement in its operating margin, which analysts expect to rise to 7.5 percent in 2016 from 6.3 percent in 2015, still half that of Nike, because it lags so much in the U.S.   Continued...

 
FILE PHOTO: Shareholders of Adidas Group silhouetted in front of the company logo in Fuerth near Nuremberg, Germany, May 8, 2008.  REUTERS/Michaela Rehle/File Photo