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Battle of the trainers: Nike vs Adidas

Analysing companies' finances and value from their financial statements using ratios and formulae
TheMotorcycleBoy
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Battle of the trainers: Nike vs Adidas

#250325

Postby TheMotorcycleBoy » September 8th, 2019, 2:52 pm

Hi folks,

With encouragement from several here (mainly Salvor and VRD) I've started researching a few overseas (particularly US) stocks. I started to look at Nike (NYSE:NKE) last weekend, but I decided that I should also review Adidas (ETR:ADS) as a yardstick. Both are big firms with Nike at $138.97B and and Adidas E53.035B. The impression I'm currently getting is that Nike's growth in the US has markedly slowed down over the past few years, though has maintained non-US growth, whereas Adidas have grown very strongly over in the US and also in the rest of the world. I have been over some of the segment analysis for both firms, bearing in mind that ADS EoY is December, whereas NKE was May. Also both use somewhat different ways to split regions :roll: However I've managed to collect some data which compares US and non-US revenues over the last few periods. Note the screen grab contains raw data and workings as I tried to figure out HTH to compare like4like.



I'd been googling earlier in the week, and found some useful, which suggests that Adidas have taken the lead (perhaps temporarily?) from Nike, as being the most "hip". As usual I can't find exactly the same sources right now. However, after forming a login atLexology, I grabbed some data (alas it's about 15 months old), which uses "image counts on Instagram/Twitter uploads" which verifies this, along with the revenue figures above:



It seems there are lots of articles out there comparing the two. I'll probably try to upload some my condensed reading notes, or just verbatim in a bit. It's interesting to see just how both manufacturers have in the "apparel" space and the numbers of social media likes either firm gets.
here's one of many:

https://www.instagram.com/x_xmellix_x/

Further, note that whilst Nike and Adidas are the "big brands", both firms do own other smaller brands such as Nike own "Converse" and Adidas own "Reebok".

I'll try to upload more in the next few hours/days, but if anyone else has any opinions on any aspect of the these companies, then please chip in! Love to hear more good and bad points regarding either as investment.

thanks Matt

TheMotorcycleBoy
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Re: Battle of the trainers: Nike vs Adidas

#250326

Postby TheMotorcycleBoy » September 8th, 2019, 3:07 pm

Here's the fundamental analysis. Firstly for Adidas. What's worthy of note I think is that it frequently cash-rich and even when it holds net debt (2014-2016) it is very low leveraged/geared. Further note that profitability, it is not until the last 2 periods that it starts to motor (IMO), as that's where measures such as OM, ROCE and CROCI start to impress.

Also observe Dividend payout is quite consistently about 41%. Retention ratio (remainder after paying for divs and buybacks / net income) is only low around 2014, 2015, 2018 where more buybacks happened, but presumably in 2016-2017 a lot of wonga went into reinvesting in business.


TheMotorcycleBoy
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Re: Battle of the trainers: Nike vs Adidas

#250330

Postby TheMotorcycleBoy » September 8th, 2019, 3:43 pm

Here are similar figures for Nike. Not only are they always cash rich, they are consistently very profitable. Alas they are doing the usual US-company thing of heavy stock repurchases noteable due -ve retention ratio, falling retained earnings, and RoE accelerating toward infinitely (not so in 2018, due to tax catch up). Perhaps their continued cash-richness and massive interest coverage excuses this?


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Re: Battle of the trainers: Nike vs Adidas

#250331

Postby Archtronics » September 8th, 2019, 3:45 pm

Not investment information but my opinion since I’m a young person who buys trainers. :D

Adidas tends to be more for classic style trainers you just replace like for like. Eg. I’ve had a pair of Gazelles pretty much constantly since being a kid.
A very generalised comment but I don’t see them doings a whole lot of new stuff and they don’t seem as popular as Nike etc.

Nike puts out a lot more new products both fashion, sportswear and seems more common place in the gym and out and about.
They also have a lot more celebrity endorsements across a variety of sports & tech intergration with the likes of Apple etc.

I’m not sure how it translate to making money, I feel like Nike is more popular overall. How true that is I’m not sure.

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Re: Battle of the trainers: Nike vs Adidas

#250333

Postby TheMotorcycleBoy » September 8th, 2019, 3:58 pm

Here's a few growth (CAGR across the reviewed periods) figures:


Both obviously look pretty reasonable. ADS probably have the edge IMO re. EPS, Cashflow and DPS, of course doing so with markedly less attrition of their equity base.

On the personal investment (for me in my ISA), ADS has a slight disadvantage over NKE, i.e. divs are charged/taxed at about 26% by German Authorities, whereas due to my w8ben the div tax for NKE would only be 15%.

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Re: Battle of the trainers: Nike vs Adidas

#250337

Postby TheMotorcycleBoy » September 8th, 2019, 4:21 pm

Archtronics wrote:Not investment information but my opinion since I’m a young person who buys trainers. :D

No worries at all! This forum is "Company Analysis" so any information is good information not just the figures.

Adidas tends to be more for classic style trainers you just replace like for like. Eg. I’ve had a pair of Gazelles pretty much constantly since being a kid.
A very generalised comment but I don’t see them doings a whole lot of new stuff and they don’t seem as popular as Nike etc.

Must say both my kids (14 & 17) rave more about Nike too. That could well be a non-US thing. As you can see in my first post Nike are still growing well in other regional markets. It's the US where they've dropped of late.

Unfortunately for Nike, a few celebs have swapped allegiances (over to Ads)
"Having the Kardashians wear your shoes helps," Svezia said.
from https://money.cnn.com/2018/04/16/news/c ... index.html

Probably because Kanye West got pissed with Nike (they didn't give him as much design freedom or something in their marketing).
Kanye expressed frustration over Nike's unwillingness to change, likening the Swoosh to Obama: 'perfect' but 'not really going to change anything'. He described his departure from Nike as 'heartbreaking', but explained that the decision was made because Nike refused to pay him royalties for the sales of his own shoe. Instead, according to Kanye, the brand wanted to pay some of the proceeds to a charity of his choosing.

Kanye also stated that Nike CEO Mark Parker was unwilling to get on the phone with him and that the people at Nike didn't understand why people liked Yeezys. By comparison, Kanye claimed to have the cell phone number for adidas' CEO, describing him as 'someone who allowed me to build something'.

from https://www.sneakerfreaker.com/articles ... rk-parker/

from https://money.cnn.com/2018/04/16/news/c ... index.html again:
But Nike still courts some of the biggest names in sports. It has pricey, lifetime deals with Cristiano Ronaldo, LeBron James and Michael Jordan, whose Air Jordan brand is a boon for the company. Nike also has a sponsorship deal with Serena Williams, and recently released its first line of female Air Jordans.

Nike is also the official uniform provider of the NBA this season -- a deal it snatched from Adidas. Nike also recently locked in a long-standing partnership with the NFL with a deal that runs through 2028.
Nike depends on big names for marketing, and still features the biggest names. But Adidas has encroached on that territory.

In 2015 it lured NBA superstar James Harden away from Nike.


Nike puts out a lot more new products both fashion, sportswear and seems more common place in the gym and out and about.
They also have a lot more celebrity endorsements across a variety of sports & tech intergration with the likes of Apple etc.

Yes. Additionally I believe Nike have more technically outstanding running gear. One of my mates was recently describing how the carbon plate in the Fly range was rated, and apparently is hot stuff

https://www.nike.com/gb/en_gb/c/running/vaporfly
https://www.headjordan.com/2019/01/perf ... -zoom-fly/
https://www.sportsshoes.com/product/nik ... oes-~-fa19

Indeed people are paying hot prices for them.

I’m not sure how it translate to making money, I feel like Nike is more popular overall. How true that is I’m not sure.

I suppose it has to do with NKE "sneaking" back their share of the US market / aggressive growth in rest of growth. And use of pricing power wherever possible.

Matt

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Re: Battle of the trainers: Nike vs Adidas

#250340

Postby TheMotorcycleBoy » September 8th, 2019, 4:29 pm

One thing I find attractive about Nike, and perhaps this underpins their slight "underperformance" Stateside, is despite being American, they are pretty individualistic over there.

They pulled their Betsy Ross flag trainer range due to far-right implications (a la Trumpism etc)
https://medium.com/swlh/nike-pulled-the ... 969793ef9a

Which had them lose $1M of factory building incentive
"Nike will miss out on promised financial incentives to build a plant in Arizona after the company was caught in the middle of another politically charged controversy for its decision to remove US Independence Day-themed shoes featuring an 18th-century American flag."

https://www.ft.com/content/b2345000-9ca ... 640c9feebb

New plant in Arizona
https://uk.reuters.com/article/us-nike- ... KKCN1U702C

And of course their contraversial stand re. Colin Kaepernick who wouldn't stand when the Anthem was played at a 2016 game
https://en.wikipedia.org/wiki/Colin_Kaepernick#Activism
https://www.highsnobiety.com/p/nike-kae ... ear-later/

Their contraversial attitude possibly has mixed consequence Stateside, but globally will be seen as "hip".

Matt

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Re: Battle of the trainers: Nike vs Adidas

#250361

Postby TheMotorcycleBoy » September 8th, 2019, 5:48 pm

These folks omnilytics (think there are some of fashion analysis group?) https://omnilytics.co/blog/nike-vs-adidas-whos-leading have lots of interesting things to say about both. However, currently (the last hour or so) I'm more focused on NKE.

(Note this article came out Feb 2019)

Two years later, adidas saw a resurgence – some even called it a revival. Thanks to the iconic Superstar and NMD line, paired with buzzworthy endorsements with the likes of Kanye West, the three-stripes were back in the game. Recognising trends early and speeding up the supply chain boosted adidas’ sales (and shares) in Q3 of 2017 – the same time Nike faltered in North America.

While adidas still has a long way to go to beat Nike’s total revenue, that doesn’t mean the swoosh brand sat back and relaxed. It was clear that adidas was stepping up with new approaches, so Nike had to do something to maintain its foothold.

In 2018, Nike not only focused on strong designer collaborations with Undercover, Comme des Garçons and Off-White, but allocated resources to improve AI and consumer behaviour too. Let’s not forget about the PR move that took the internet by storm: the Colin Kaepernick campaign. The move was deemed controversial, but reports said that the political stand actually boosted sales. Nike did it again this year, featuring Serena Williams in its #dreamcrazier ad that premiered during the Oscars.


Further they do some more marketing kinda breakdown metrics:

Assortment size vs. sell-out rate
Here, Nike reigned supreme in all of the metrics. They had a higher assortment count than adidas, as well as a stronger sell-out and replenishment levels. There was also an indication of high demand for Nike products, as the brand had more sell-outs at full price. In other words, consumers were willing to pay at full-price without waiting for the products to go on discount.

On the other hand, adidas missed out by having lower SKUs and more sell-outs at discounted items. This could be why adidas introduced a new limited supply model for certain popular shoes, hoping to squash pricing pressures. Reducing supply isn’t new in the fashion industry, brands like Supreme and Zara use this method to increase scarcity – and to encourage consumers to buy immediately rather than biding their time.


Assortment size vs. sell-out rate by category
Historically, activewear shoes had always dominated the market. But ever since streetwear became a trend (it was huge in 2018) lifestyle shoes lead the pack for both brands. It was followed by activewear shoes and activewear tops & t-shirts. While Nike’s second largest assortment was activewear shoes, adidas stocked more activewear tops & t-shirts.

Nike had 3x more SKUs in all three categories, with Activewear Shoes as their best-performing category. It was the only category that achieved more than 85% sell-out rate, the highest of them all. While the rest saw a similar sell-out rate, Nike captured a higher margin due to its larger assortment.


Breakdown of top categories (by assortment size)
Based on our comparison, Nike is ahead of the pack, with strong sell-outs and larger offerings. The brand may have faltered slightly in 2017, but it seems like they’ve gotten a grasp of what their consumers are looking for – something adidas actually started. Nike’s investment in technology and supply chain innovation may also be a silent advantage, considering that the brand is quick to replenish with the right products.

The three stripes brand may need to re-look into its product assortment and cycles, as well as its pricing strategies. After all, the activewear market is getting stiff competition. According to our global activewear report, another brand emerged above adidas – a surprising entry that may surpass even Nike.

But don’t be fooled, they are ahead of the pack, but the race never stops. After all, adidas made a strong comeback a few years back. With the new adidas originals ZX 4000 4D getting rave reviews and more incorporation of technology in 2019, the future looks promising.

Reaching the number #1 spot isn’t easy, but securing it is even tougher. As consumer preference and behaviour changes, so will the retail environment. The winner is who can anticipate the change and stay ahead of consumer demand.


Matt

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Re: Battle of the trainers: Nike vs Adidas

#307169

Postby TheMotorcycleBoy » May 10th, 2020, 10:48 am

Note Adidas cuts div. as part of agreement to receive cv-19 aid. This is old news, but I've just recv'd a thanks for this thread, so thought it would nice to share the goss.

https://www.bloomberg.com/news/articles ... rus-crisis


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