On Wednesday, a Bernstein analysis highlighted the recent performance of Pou Sheng International Holdings Ltd., a major wholesale partner for Nike (NYSE:NKE) and Adidas (OTC:ADDYY) in China. The report revealed a significant 11.9% drop in Pou Sheng's November retail sales. However, there is an indication of a modest recovery, with a two-year stacked growth rate improving since September, reaching 7.3% in November.
For Adidas specifically, InvestingPro data shows the company has maintained strong performance, with revenue reaching $25.1 billion in the last twelve months and a healthy gross margin of 49.72%.
Despite the monthly revenue decline ranging from mid-single digits to double digits since February, the year-to-date trend shows an 8.4% decrease. This contrasts with the parent company Yue Yuen Industrial Holdings Ltd., the world's largest sportswear manufacturer, which saw a 17% increase in manufacturing revenue for the same month.
This growth, although slightly below the more than 20% year-over-year manufacturing revenue from July to October, still marks a strong performance with a 10.9% increase year-to-date. Notably, Adidas has shown resilience in this environment, with InvestingPro reporting a 19.88% year-to-date price return, demonstrating investor confidence in the company's strategy.
In the context of the broader Chinese economy, the sportswear sector appears to be outperforming general retail trends. The Bernstein analyst's recent channel checks suggest that sportswear demand in China has been more resilient and has shown improvement throughout the year. The modest improvement in the two-year trend also implies that order books for sportswear are beginning to pick up.
Moreover, the global footwear market is on a path to normalization, with demand surpassing supply, as stated in Yue Yuen's third-quarter report released two months ago. This condition has been a contributing factor to the company's robust manufacturing growth.
In conclusion, while the Chinese macroeconomic environment remains challenging, there are signs of modest improvement within the sportswear sector. Western demand remains strong and is reflected in the continued growth in manufacturing. This dynamic suggests that Nike and Adidas may see varying impacts, with potential recovery on the horizon as indicated by the latest sales and manufacturing data.
According to InvestingPro analysis, Adidas maintains its position as a prominent player in the Textiles, Apparel & Luxury Goods industry, with multiple analysts revising earnings estimates upward for the upcoming period. InvestingPro subscribers have access to 12 additional key insights about Adidas, including detailed financial health scores and comprehensive valuation metrics.
In other recent news, adidas AG has reported strong Q3 2024 results, including a notable 10% currency-neutral sales growth and a significant 50% increase in EBIT to €598 million. The company's earnings call highlighted growth in various regions, such as Europe, Asia, and Latin America, and across different product lines. CEO Bjørn Gulden and CFO Harm Ohlmeyer shared strategic initiatives and financial targets, including a €1.2 billion operating profit goal for the year.
The company has seen a 15% increase in direct-to-consumer sales, and a 25% growth in e-commerce, excluding YEEZY. adidas is also expanding into emerging markets, with plans to open new stores and establish franchise partnerships. Despite these positive developments, e-commerce saw an overall decline of 3%, and the company remains cautious about capital expenditures, projected at €600 million for the year.
The management team is focused on inventory management, with 80% of inventory ready for the current and upcoming season. There's an emphasis on building relationships in specialty running markets and fulfilling Q4 demand efficiently.
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