Much Has Gone Wrong for Adidas Recently, but Its Status as a Popular Global Sportswear Brand Holds

We think Adidas is a leader in athletic and “athleisure” apparel with a narrow-moat rating based on an intangible brand asset. While it has been beset with problems since the COVID-19 outbreak, we think it can still make progress under its five-year Own the Game plan. For example, its e-commerce, now available in nearly 60 countries, generated an estimated EUR 4.9 billion in sales in 2022 (22% of its total), and we project it will exceed EUR 10 billion and 35% of its total sales by the end of this decade. Further, we think the firm’s new sportswear offerings and plans to improve its position in key categories like running and outdoor will be successful. However, because of heavy competition, the termination of the Yeezy partnership, and its slow recovery in China, our estimates are below or at the low end of Adidas’ five-year targets of compound average sales growth of 8%-10%, average net income growth of 16%-18%, and 2025 gross and operating margins of 53%-55% and 12%-14%, respectively.