Great things come from small beginnings and that is certainly the case for global sportswear apparel manufacturer Adidas (ADDYY). The company began life in the home of one Adi Dassler, who decided to make sports shoes in his family home. The operation soon outgrew its modest production facilities and with the help of his brother Rudi, Dassler Brothers Shoe Factory was born.
As with all successful sports related brands, the brothers recognised the value of promoting their product through association with top athletes. The brothers provided running shoes to a number of athletes in the 1928 Olympics, in addition to the running star of the time, Jesse Owens in the 1936 Olympics.
World War II upset the apple cart somewhat, with the factory turned over to the manufacture of anti-tank weapons. The brothers subsequently went their separate ways after the war, deciding that they could no longer work together after a long running feud. Adi renamed the company Adidas in 1949, while Rudi established Puma. The brothers never again spoke to each other and the companies remain bitter rivals to this day.
The late 1980s and early 1990s were a chequered period for Adidas. The company was bought by one Bernard Tapie. Although Mr Tapie had a record of rescuing bankrupt companies, he eventually went bankrupt himself, having borrowed too heavily for the Adidas acquisition. Control passed in 1993 to his friend Robert Louis-Dreyfus.
Adidas’s fortunes improved under the new ownership. The company made a major acquisition in 1997, bringing the ski wear manufacturer Salomon into the fold. The deal also brought with it golf company heavyweights Taylormade and Maxfli. The addition of these strong golfing brands allowed management to open up another front against major competitor Nike, who has a significant presence in golf.
Although management sold Solomon and Maxfli in 2005 and 2008 respectively, the company retains their golf division through Taylormade-Adidas golf.
Adidas’s campaign against Nike strengthened in 2006 through the acquisition of their UK rival Reebok. The acquisition lifted Adidas to the number two position in the ranks of the world’s athletic shoe brands, which is of course the heart of the company.
Financials
The table below shows Adidas’s ROE, in conjunction with other key ratios, for the financial years to 31 December 2000 through to 2008.
As the data shows, although the company’s ROE has weakened from the 2000 high of 24.3%, it has remained reasonably consistent around an average of 20.7%. We would also note that the company’s ROE figures received a boost in the earlier years from a considerably higher level of debt, as shown by the net debt to equity ratio well in excess of 100% through to 2002.
Return on Capital (ROC) accounts for variable levels of debt, providing a truer picture of profitability. On this metric, the picture is more positive with considerably less volatility.
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As with all successful sports related brands, the brothers recognised the value of promoting their product through association with top athletes. The brothers provided running shoes to a number of athletes in the 1928 Olympics, in addition to the running star of the time, Jesse Owens in the 1936 Olympics.
World War II upset the apple cart somewhat, with the factory turned over to the manufacture of anti-tank weapons. The brothers subsequently went their separate ways after the war, deciding that they could no longer work together after a long running feud. Adi renamed the company Adidas in 1949, while Rudi established Puma. The brothers never again spoke to each other and the companies remain bitter rivals to this day.
The late 1980s and early 1990s were a chequered period for Adidas. The company was bought by one Bernard Tapie. Although Mr Tapie had a record of rescuing bankrupt companies, he eventually went bankrupt himself, having borrowed too heavily for the Adidas acquisition. Control passed in 1993 to his friend Robert Louis-Dreyfus.
Adidas’s fortunes improved under the new ownership. The company made a major acquisition in 1997, bringing the ski wear manufacturer Salomon into the fold. The deal also brought with it golf company heavyweights Taylormade and Maxfli. The addition of these strong golfing brands allowed management to open up another front against major competitor Nike, who has a significant presence in golf.
Although management sold Solomon and Maxfli in 2005 and 2008 respectively, the company retains their golf division through Taylormade-Adidas golf.
Adidas’s campaign against Nike strengthened in 2006 through the acquisition of their UK rival Reebok. The acquisition lifted Adidas to the number two position in the ranks of the world’s athletic shoe brands, which is of course the heart of the company.
Financials
The table below shows Adidas’s ROE, in conjunction with other key ratios, for the financial years to 31 December 2000 through to 2008.
As the data shows, although the company’s ROE has weakened from the 2000 high of 24.3%, it has remained reasonably consistent around an average of 20.7%. We would also note that the company’s ROE figures received a boost in the earlier years from a considerably higher level of debt, as shown by the net debt to equity ratio well in excess of 100% through to 2002.
Return on Capital (ROC) accounts for variable levels of debt, providing a truer picture of profitability. On this metric, the picture is more positive with considerably less volatility.
This story continues in the Fat Prophets Members area. To get the complete report, join Fat Prophets today!
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