adidas AG (ADR)(OTCMKTS:ADDYY) measures to excel in the competitive race seems to be brining no fruitful result for the company. Since 2011, the company had failed to match the performance of its competitor Nike both at bottom and top-line growth.
The performance
Adidas sales surged by meager 9.1% in between 2011 to 2014 compared to sales growth of 33% posted by Nike in the same period. The company’s net income declined 18% in the period between 2011 and 2014 versus net income jump of 26% posted by Nike. It is clear that Adidas overall performance failed to match the performance of Nike, especially in Western Europe, which is believed to be a forte of Adidas.
The reasons
Recently Under Armour Inc (NYSE:UA) knocked down Adidas and cracked an agreement valued at $96 million, spanning ten years, with the University of Wisconsin. This deal comes in the list of the most remarkable agreements that the company has finalized with college athletics. Kevin Plank, the Founder and CEO of Under Armour, is thrilled about the agreement with Wisconsin, which he states both sentimental and strategic. He said that the first big account that he ever offered product to was Eastbay. It is strategic as when the management reviews e-commerce business they identify extensive orders from Wisconsin zip codes.
The blow
This deal marks the second major hit Adidas had to deal with among the top athletic firms wherein it was trying to renew the deal with Wisconsin. Prior to Under Armour, the company had a licensing deal with Wisconsin for 15 years, which came to an end this year, turning the college the fourth institute to renounce its alliance with Adidas recently. Licensing agreements were previously taken by Nike for Michigan and Tennessee while Under Armour snatched Notre Dame from Adidas.
