Footwear Insight

THE FOOTWEAR EYE footwearinsight.com #EARNINGS Adidas Eyes 'Significant' Topline Acceleration in Q4 C iting the discontinuation of supply chain shortages and easier year-over-year com- parisons, the Three Stripes is poised for sales growth in Q4 that will help the company meet its FY19 outlook of 5 to 8 percent revenue expansion (likely coming in at 6.5 percent) and a gross margin slightly above 52 percent. During the FY's final period, Adidas intends to introduce its first Beyoncé products under two labels in a controlled fashion as development on its next five year (2021-25) strategy continues ahead of a planned Nov. 2020 unveiling. New Supervisory Board member Brian Grevy, 48, a former Adidas executive who most recently has been CEO of Gant, is expected to play a role in the crafting the company's go-forward approach. In 2020, ahead of the new five year plan, CEO Kasper Rorsted says Adidas will continue to increase its market- ing investment above prior year levels, "tackle challenges d e c i s i v e l y , " a n d focus on "multiple dimensions of inno- vation." The latter is expected to include more customized Boost products and sustainable-related offerings like the new 100-percent Adidas by Stella McCartney Infinite Hoodie. North American sales rose 16 percent in euros to the equivalent of $1.62 billon in Q3 ended Sep. 30 with adidas brand sales up 15 percent to $1.48 billion and Reebok sales rising 23 percent to $139.9 million. Globally, Adidas footwear sales stepped 4 percent higher to $3.84 billion without growth from the Yeezy franchise, which faced a difficult year- over-year comparison, and 17 percent expansion in apparel to $2.89 billion. l Under Armour Playing the 'Long Game' in Footwear S et to assume Kevin Plank's CEO role in January, President and COO Patrik Frisk says Under Armour's expectations for its footwear busi- ness are unchanged despite a 12 percent drop in Q3 revenues to $251 million. "The work we've done to recalibrate the [footwear] business, reduce inefficient volume and improve segmentation across price points are enabling us to drive greater focus on prioritization into the categories where we believe we can win," Frisk told analysts last week. In Q3, Under Armour's North American revenue dipped 4 percent, in line with expectations, largely due to lower sales in the off-price channel and some softness in its direct-to-consumer business due to "traffic and conversion challenges" in its outlet and e-commerce businesses. The company is moving to a new e-commerce platform and site in 2020 that it believes will enhance its ability to service customers. Global wholesale revenues were down 2 percent in Q3 to $892 million . Under Armour's current FY19 outlook calls for 2 percent sales expansion versus a prior forecast of 3 to 4 percent growth, partly due to lower-than-planned excess inventory to service the off-price channel. "Ultimately, for our footwear this year, we're expecting to grow," says Frisk. "And we're very encouraged by what's happening in our performance run and also in our women's training footwear." Already utilizing four midsole technologies, including its recently launched Liquify, Under Armour will rollout additional ones in 2020. "We believe there is an opportunity for us to add some additional cushioning technology at the very high end of the spectrum," Frisk said. "We're going to be focused on doing that in the very near future, but we believe that the unlock for footwear for any company is to be able to drive franchises on these platforms." l Mizuno Sees Growth M izuno reported 11.8 percent growth in Americas' revenues in Q2 to the equiva- lent of $95.1 million as footwear grew 14.7 percent in Yen to the equivalent of $35.7 million and apparel sales were flat at $14.6 million. The company said the region's running shoe market has shown signs of recovery and attributed the topline growth to strong running and golf sales. l Adidas by Stella McCartney Infinite Hoodie. 12 • Footwear Insight ~ November/December 2019

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