ADS GR

adidas AG

Consumer


Presented:05/19/2023
Price:€159.02
Cap:$31.62B
Current Price:€239.70
Cap:$47.67B

Presented

Date05/19/2023
Price€159.02
Market Cap$31.62B
Ent Value$39.72B
P/E Ratio373.64x
Book Value€27.16
Div Yield0.44%
Shares O/S178.54M
Ave Daily Vol606,767
Short IntN/A

Current

Price€239.70
Market Cap$47.67B
adidas AG engages in the design, distribution, and marketing of athletic and sporting lifestyle products. It operates through the following geographical segments: EMEA, North America, Greater China, Asia-Pacific, Latin America, and Other Businesses. The Other Businesses segment includes the activities of the Y-3 label and other subordinated businesses. The company was founded by Adolf Dassler in 1920 and is headquartered in Herzogenaurach, Germany.

Publicly traded companies mentioned herein: Adidas AG (ADS GR), Crocs Inc (CROX), Deckers Outdoor Corp (DECK), Foot Locker Inc (FL), Nike Inc (NKE), On Holding AG (ONON), Puma SE (PUM GR), Skechers USA Inc (SKX)

Highlights

The presenter is short shares of Adidas AG (ADS GR), which is up 29% YTD due to excitement around a potential turnaround and a medium-term target to return to 10% EBIT margins following the appointment of new CEO Bjorn Gulden effective January 1st, 2023. Prior to joining Adidas, Gulden was the CEO at Puma and was highly regarded by the investment community. However, simply bringing in a strong CEO will not offset the current landscape and Adidas’s deteriorating position. Foot Locker declined ~25% on earnings despite a respected leader (CEO Mary Dillon). At €165 per share, the stock trades at 43x 2024 consensus earnings. He thinks these businesses should trade at 25x – 30x earnings, which may be generous for Adidas since he considers it broken and doesn’t see a bridge to snap back with consumer health weakening. Modeling an EPS miss in 2024 and a 30x multiple, he sees 40% – 50% downside to the stock. 

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Idea Discussion

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