Adidas’ inability to replicate growth it has achieved in international markets like North America and China domestically in Europe has dampened brand sentiment in the eyes of investors in 2019.
But third-quarter results reported this week hint that the German brand may finally be trending in the right direction, with an eye towards the UEFA European Championships next summer.
Adidas reported a 3% growth in merchandise sales in Europe to $1.7 billion for the period ending September 30. That’s compared to 2% declines in the region through the first six months of the year.
Popular Adidas footwear in the performance and sport-Inspired categories additionally helped offset high single-digit losses by the company’s subsidiary Reebok brand in the third quarter, which weighed down results, according to the retailer.
“You can really see the turnaround is now clearly visible and the recovery is accelerating going into the fourth quarter,” said Harm Ohlmeyer, Adidas chief financial officer, on the company’s earnings call with analysts. “We expect the fourth quarter to be supported by UEFA Euro 2020. And as a result, this should lead to a slight increase for the full year.”
Adidas unveiled the official match ball of UEFA Euro 2020 on Wednesday, and will soon make official jerseys available for purchase, it said. Adidas is the official shirt partner of several popular European men’s national teams, including Spain and Germany.
CEO Kasper Rorsted also told analysts the German sports apparel company committed 6% more to its marketing budget year-over-year in the quarter to build greater awareness in key markets, including Europe. However, he did not offer up any details behind the strategy.
That push in Europe might be coming as a response to a surge by Nike in the region.
Nike recently surpassed Adidas in Europe by percentage of quarterly sales growth. The U.S.-based company reported 6% increases in sales to $2.7 billion in the Europe, Middle East, and Africa region in its fiscal 2020 first quarter.
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“I do want to stress that our marketing investment this year will go up compared to previous years,” said Rorsted, about Adidas’ marketing push. “We have today, the highest relative spend to revenue in the industry, and second-highest marketing working budget.”
Adidas reported 6.41 billion euros in net sales for the third quarter, a 6% increase on a currency-neutral basis year-over-year. The company’s financial results were buoyed by growth in all market segments, highlighted by performance in North America and China, which saw sales climb by 10% and 11%, respectively, according to the company. Adidas’ e-commerce business additionally grew 14% in the quarter.
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