Athleisure bubble no match for Adidas, hikes forecast
For all of you waiting for the athleisure bubble to burst, Adidas isn't playing along.
Amid concerns that consumers' heated love affair with athletic apparel will soon come to an end, the industry's largest European competitor on Thursday issued preliminary second-quarter results showing a 21 percent increase in revenues.
Because of this momentum, the company lifted its full-year revenue and earnings guidance. It now expects net income to rise between 35 percent and 39 percent, to between 975 million euros and 1 billion euros. That compares with its prior forecast of 25 percent growth. Adidas also expects sales growth in the high teens, compared with expectations for 15 percent growth previously.
The resurgence of Adidas, which had suffered a long slump in the United States, comes as industry experts debate how much longer the meteoric rise in athletic apparel can last. While some argue that a shift toward healthy lifestyles is a permanent change in consumers' psyche, others say that the trend of wearing these items outside of the gym — say, to grab a latte at a nearby coffee shop — is destined to end.
"We believe consumer interest in active lifestyle products is far more structural than cyclical in nature and still in the early stage," Evercore ISI analyst Omar Saad told investors Wednesday.
"Expressions of status are evolving away from the traditional markers of material goods. Today, health, fitness and leading an active lifestyle are powerful ways to express education, affluence, style, work ethic and motivation."
Saad on Wednesday upgraded shares of Adidas to "buy" from "hold," saying the brand is best positioned to capitalize on the fashionable sport trend. Its partnership with rapper Kanye West is a big reason why the label has been revitalized in the eyes of American shoppers, after being surpassed by Under Armour in market share here.
Yet not everyone is convinced that the athleisure trend is here to stay — at least, to the same magnitude. Retail analyst Jan Kniffen last week told CNBC that he expects the "fad" aspect of athletic apparel to fall by the wayside. That means women will still wear the gear to work out, but not to Sunday brunch.
"That piece of the business is not going to be there," he said.
Under Armour shares on Thursday continued a slide that started earlier this week, when the company issued a third-quarter sales forecast thatcalled for a slowdown to roughly 20 percent growth. That compares with its recent precedent of at least a 25 percent increase in quarterly revenue.
Meanwhile, Nike's latest quarterly revenues fell short of Wall Street's expectations. Investors were likewise concerned about softer-than-expected growth in its future orders, a metric that refers to orders placed by wholesale customers that have not yet been delivered.
Under Armour shares have fallen 22 percent over the past year, toward $39. Nike stock is down 3 percent over that time frame, and is trading around $55 a share. Meanwhile, Adidas shares have roughly doubled to 144 euros.