Reference no: EM13175068

London 2012 Olympics: Adidas aims to beat Nike into second place at Games

 It is not only the athletes that will be competing for first place at next summer's Olympic Games. Adidas, the German sportswear brand, plans to use the games as a springboard to overtake its arch rival Nike as the biggest sportswear company in the UK.

Triathlete Holly Avil wearing Adidas Team GB outfit designed by Stella McCartney Photo: PA

Nike is currently market leader in the UK with an 18pc share of the ultra-competitive £4.3bn sportswear market. Adidas is in second place with a 15pc share, but hopes that its status as official sportswear partner of the Games will help it achieve its goal of overtaking Nike by 2015 at the latest.

As well as kitting out the athletes in 25 of the 26 Olympic sports - equestrianism requires very specialised equipment - Adidas will dress the 70,000 Olympic volunteers, provide the outfits for the pre-games torch relay and create clothing for the athletes to wear in the Olympic Village.

Adidas is also the Games' official clothing licensee, and will sell Olympic-themed and branded clothes through its own stores and third-party retailers, such as Tesco and Asda. On top of this, it has appointed Stella McCartney, the designer and daughter of Sir Paul, as the creative director of Team GB. She will provide the team with garments such as their signature tracksuits and has also designed more fashionable "capsule" ranges that will be available on the high street. (High street retailer Next will provide Team GB with their formalwear, such as the suits for the opening ceremony.)

There will be a big sustainable and environmentally-friendly element to the clothing, Adidas said. It is not inconceivable that some of the athletes' kit will be at least partially made from recycled plastic drinks bottles.

Herbert Hainer, Adidas's chief executive, said the company is hoping to achieve sales of £100m from its Olympic clothing lines.

"It is the ideal platform for us to show the world that we are one of the greatest sports brands in the world," he said on a trip to London on Friday. He described Ms McCartney's designs as "fantastic".

Mr Hainer added that he is confident Team GB will do well. "The preparation and enthusiasm is tremendous, and it will help us hit our target," he said.

Adidas will bolster its marketing throughout the UK in the run-up to the Games by opening 100 temporary "AdiZones" - areas that will include free-to-use tennis, football or basketball equipment.

Gil Steyaert, Adidas's managing director of market north - the geographical area that includes the UK - said these zones will attract younger consumers to the Adidas brand. "We are one of the brands that is most relevant to the youth market. We like to believe we will be the cool brand of the Games," he said.

The whole point of the exercise is to knock Nike off its perch in the UK, he added. To do this, Adidas must beat Nike in London, where it is the top sports brand by some distance. Mr Steyaert said Adidas is the most popular brand in certain areas of the north of England, such as Liverpool. However, it must win London if it wants total dominance. Mr Steyaert said:

"London is a place where we don't have leadership yet. While we do have leadership in other parts of the UK, London is crucial."

Adidas has invested around £100m in the 2012 Olympics. This figure is split between the cost of becoming an official partner, the cost of manufacturing the clothes for the athletes, the volunteers and the retailers and the cost of marketing the ranges and the company. Even if the company achieves its desired top line sales of £100m, it will only go some way to paying off the £100m bottom-line investment.

Mr Hainer admitted that if looked at purely on a profit and loss basis, the investment is a "big loss". However, he said that the positive benefits to Adidas's brand and standing in the UK are manifold.

Nike is unlikely to sit back and allow Adidas to press ahead with its assault. It has taken a large store in the Westfield shopping centre just next to the Olympic site, a shopping centre through which 70pc of ticket holders to the main stadium will pass, and it has signed a deal to be part of Boris Johnson's [The Mayor of London] Legacy for London sports plan.

But Mr Hainer is equally bullish. "I am very confident that we will have a presence that won't be missed," he said. "When you are playing in the sporting goods arena, you want to win."

Adidas' rich history in the Olympics 

Adidas' involvement in the 2012 London Games continues the company's "rich history" in the Olympic movement, chief executive Herbert Hainer said.

In the 1928 Amsterdam Olympics, Lina Radke-Batschauer was the first athlete to win an Olympic gold medal wearing Adidas shoes. She set a record time in the women's 800m.

Adidas shoes were also worn at the 1952 Helsinki Games by Emil Zatopek, the Czech long-distance runner, who won three gold medals in one week.

Adidas-wearing athletes also dominated the 1968 Olympic games in Mexico. Among them was Dick Fosbury, who cleared 2.24m to take the gold medal in the high jump using a new technique.

Topic:

You are an investment analyst specialising in a sector of your own choosing from the following list. Write a report addressed to a client, whose investment needs you may choose using your imagination, comparing two companies from this sector. Your report should recommend purchasing a controlling shareholding in one of the two companies, which need not be located in the same country but should both report under International Financial Reporting Standards (IFRS). The theme of your comparison is a consideration of your two chosen companies as alternative investment possibilities.

You may choose from the following sectors which I have identified from the UK's Financial Times, but you may use companies listed on any stock exchange in similar sectors, providing the financial statements are prepared under IFRS:

(i) Travel and Leisure

(ii) Retailers

(iii) Construction and Materials

You will need to cover the following in your report:

- Explain your choice of sector. What opportunities exist for investors in this section, based on your research?

- Explain your choice of the two companies - why you think they are interesting investment possibilities? Examples might be:

o Different business models

o Different countries with different business environments and / or attitudes to sustainable economic growth

- Prepare a financial analysis of each company and compare the two, i.e. use financial analysis to explore the similarities and differences between the two companies. To do this you will need to:

o Select and calculate financial ratios (no more than 10 key ratios should be chosen and you should explain briefly why you have selected these  ratios);

o Analyse the cash flow position of the companies;

o Perform an analysis of the financial position and performance of the business, incorporating the information you found in your ratios and cash flow analysis;

o Consider the influence of government and other regulatory authorities on the sector; and

o Outline the stock market's view of the companies.

- Provide a conclusion and recommendations. This will depend to a certain extent on your reasons for choosing the two companies, and on the investor's needs. For example:

o What is the successful company's 'secret' in terms of competitive advantage and strategy?

o How are differences in business models reflected in the financial statements' figures?

o What is driving the recovery of the industry and your chosen company?

o Why does the stock market see the companies as it does?

o Which (if either) company would you recommend an investment in, and why?