Adidas' Status as a Leading Global Sportswear Brand Holds Despite Multiple Challenges

We think Adidas is a leader in athletic and athleisure apparel with a narrow moat based on an intangible brand asset. While it has been beset with problems over the past few years, we think it can still make progress under its Own the Game plan for 2021-25. For example, Adidas' e-commerce, now available in about 67 countries, generated about EUR 4 billion in sales in 2023 (roughly 19% of its total sales), and we project this will exceed EUR 9 billion and 30% of its yearly 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 the low end of Own the Game 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.