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Investing.com — How are the mighty fallen. The time was when Adidas (ETR:ADSGN) stock would fall heavily if the German national soccer team ever made an early exit from the World Cup. Defeat at, say, the quarter-final stage (such as 1994 or 1998), would depress merchandise sales in the company’s home market so much that it would affect the company’s global numbers.
No more. By 05:40 ET (10:40 GMT) in the morning after the German national side was eliminated at the group stage for the second World Cup running. Adidas stock opened with a resigned shrug, falling only 0.1% at the open, before eking out a gain of 0.3%.
The main reason, of course, is that Adidas has outgrown its home market enormously in the last 20 years: even the Europe, Middle East, and Africa region, which includes Germany, only accounts for one-third of its global sales. That also means it has other, bigger problems to worry about these days, such as a consumer boycott in China and the implosion of a successful business partnership with rapper Kanye West.
It’s also possible that Germany’s performances at major tournaments since 2014 have led to more realistic expectations at Adidas with regard to inventory management. It’s the third time in a row that the team has failed to reach the quarter-final stage – an unprecedented fallow streak for the four-time world champions. And again, Adidas currently has much bigger inventory problems to worry about, as a surprise slowdown in consumer spending led to a 63% rise in unsold stock in its latest quarterly report.
But the tournament is going badly for Adidas in other ways too. Rival Nike (NYSE:NKE) has a dominant role as official kit supplier among the other teams, having tournament favorites including Brazil, France, England, Portugal, and the Netherlands in its stable, as well as surprise successes Australia and the U.S.A. By contrast, two of Adidas’ other big hopes – Belgium and Mexico – have already been knocked out alongside Germany. Its hopes now rest on Lionel Messi’s Argentina, Alvaro Morata’s Spain, and, ironically, Japan.
A victory for Nike in Qatar would be a bitter pill to swallow for Adidas, an evergreen sponsor of the FIFA World Cup. But for some, even that may not be the worst-case outcome. Puma (ETR:PUMG) still has a couple of horses in the race, albeit they’re long shots: Switzerland, Senegal, Ghana, and Uruguay. Should any of those end up lifting the trophy, the embarrassment could be acute for Adidas’ new CEO Bjørn Gulden, who only last month agreed to leave Puma for its bigger neighbor.
Adidas and Puma were founded by two brothers, Adolf and Rudolf Dassler. Both companies still have their headquarters in the Bavarian town of Herzogenaurach.
