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Shares of Adidas are hovering near a 10-year high following very strong full-year earnings and guidance. Clearly, the market is sending a message that the future for Adidas is pretty darn bright, especially in the U.S., despite key retailers such as Macy's (M) - Get Macy's Inc Report and J.C. Penney (JCP) - Get J. C. Penney Company, Inc. Reportclosing stores in droves. Further, the numbers Adidas just put up should make any large company jealous, and are a clear indication the brand is resonating with teens and young adults.
Sales last year rose an impressive 18%, while net profit surged 41%. Even the Reebok brand -- always seen as the red-headed stepchild in the Adidas portfolio -- notched a 6% sales increase last year. The brand had double-digit sales increases in its Classics category and mid-single-digit growth in the training and running categories, the latter powered in large part by marketing for Crossfit-related products (Reebok is the exclusive licensee of Crossfit).
However, it's not that laundry list of items that should make Under Armour and Nike worried about Adidas over the next five years. Instead, it's Adidas taking a page out of Zara-owner's Inditex's (IDEXY) book, as my colleague at TheStreet Lisa Botter points out. Adidas is now setting its sights under new CEO Kasper Rorsted on turning over styles more quickly and getting models to the market even faster.
"Adidas has set itself the goal to become the first true fast sports company," it said in its annual statement Wednesday. Wow, those are some powerful words that this writer hasn't heard from Nike and Under Armour.
To do so, Adidas is opening a second of what it calls a "Speedfactory" in Atlanta. Its first Speedfactory in Ansbach, Germany will start mass production this year.
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These factories bring production much closer to the consumer and as a result, slash transportation costs both in terms of money and resources. Another win here is that testing futuristic new sneakers and apparel in key markets gets cut down from a matter of months down to a mere hours, suggests Adidas. In the end, Adidas should be able to get cool new products to market faster than its two main rivals and in the trend-driven business of sportswear, that could be a huge competitive advantage.
Adidas is aiming to increase the share of "speed-enabled" products to at least 50% of net sales by 2020; in 2016, 15% of total sales were generated by "speed" designs. These models will be priced 20% higher than the regular range, so the plan is expected to have a positive impact on the company's profitability.
Suddenly, Under Armour's struggles seem destined to get worse in light of Adidas' advances. Nike should be OK, but even it should watch it's back and start thinking about speed-type production facilities in the U.S. (instead of continuing to milk its once ground-breaking cheap labor Asian supply chain).
Cool Reads from Around the Web
The Geneva International Motor Show is turning heads: Overnight, McLaren unveiled a $254,000 supercar that has over 700 horsepower, TheStreetreported. It's one of several high end cars that are turning heads at this year's auto show.
Today is International Women's Day: Strikes are planned across the country in a show of support for all that women do. The first women's day was in 1909 when 15,000 women marched through the streets of New York City demanding better pay, shorter work hours and voting rights. The strikes this year could hurt the bottom lines of retailers and restaurants, TheStreetreported.
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