When thinking of the two main companies for sports, whether it may be footwear or kits, the names that immediately come to everyone’s mouths are Nike and Adidas. A good example of this is two of the biggest football/soccer clubs in Europe, Real Madrid and FC Barcelona. Madrid is sponsored by Adidas, while FC Barcelona is sponsored by Nike. Nike, as you would expect, has a healthy lead over its competitors, with the company’s appeal across the globe being unmatched. Unlike the past, however, Adidas’ sales are falling short. While the brand still holds second position in sportswear-making globally, the decrease in sales in the United States are holding the company back.
Adidas’ sales of athletic footwear and apparel have fallen 23% from a year ago to $1.1 billion. This revenue is only enough for the company to take third position in the United States, behind Nike and Under Armour. Nike is a mainstay, with sales reaching a magnificent $8.9 billion. However, Under Armour has made leaps and bounds to reach second place, with a 20% increase in the past year, to take the sales up to $1.2 billion. While Adidas still has a huge following in Europe, its failure to hold down the U.S. market is a problem, as Nike is making advancements in the European market. While Adidas’s footwear sales are still relatively good, they are sorely lacking in apparel sales, which Under Armour is succeeding in through sporting goods and athletic specialty retailers.
The importance of sales in the United States cannot be underestimated, as the world’s largest economy usually provides Adidas with a quarter of the company’s yearly revenue. One of the main problems with the company is that it is suffering from a “too-European” image, as many people do not think of Adidas when buying sporting items such as basketball shoes. The company’s ailing golf sales are also contributing to their losses. Adidas is targeting soccer to increase revenue in the United States. Despite the success in the summer’s World Cup, through the official World Cup Ball, the Brazuca, soccer is a sport which is still gaining popularity in North America Their competitors, Nike, have upped their game through increased sponsorship deals, including deals with Cristiano Ronaldo and Neymar. Adidas’ problems do not just end there. In basketball, their main sponsored star, Derrick Rose of the Chicago Bulls, has suffered from a string of injuries in the past two years. This has limited the positive influence expected through advertising from such a big name. Nike is said to control 95% of the American basketball market at this time. Adidas’s acquisition of Reebok back in 2006 was supposed to help the company compete with Nike, but the expensive purchase at $3.8 billion has not helped. Reebok has been in decline for quite some time now, and the brand has had to cut its sales forecast. After being replaced by Nike as the National Football League’s apparel supplier in 2012, the brand has tried to reposition itself as a fitness gear seller.
Nike has already stepped out of Adidas’s league, but the bigger question is if Under Armour can surpass Adidas. The Baltimore-based company has recently branched its apparel into yoga clothes as well as soccer/football footwear. The company also penned a deal with the supermodel Gisele Bundchen, further increasing the brand’s appeal towards women. The shares of Under Armour have surged up 60% this year, showing that the company is definitely putting a foothold in the North American market.
Many factors have seen the decline of Adidas in the North American market. A recent decline in golf sales, the constant injuries of basketball star Derrick Rose, and the underwhelming performances of Reebok have all helped this cause. The company’s decline in sales has seen Under Armour rack up more revenue in the United States over the past year. Under Armour’s increase of apparel sales and expansion into the women’s market have seen the company gain leaps and bounds on its competitors in the past year. Adding in the decline in sales in Russia makes for grim reading. Despite all of these failures, Adidas is still ranked second globally in sales, and still holds a huge image in Europe. The benefits through the World Cup’s replica ball sales will soften the blow, but the company is not looking at a bright future without reforms. Whatever may occur in the future, Adidas will always be remembered as a giant in sportswear-making, one which carries a name filled with significance.
Follow Saad on Twitter @PrezunesRashid.
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