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Retail Intelligence ReportSports and Footwear

September 2019

Table of contentsTable of contents

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Net income & revenueof footwear brands

Global industry trend

Research findings

Brand performance &strategies

Profit & Loss report

Global footwear market trendsGlobal footwear market trends

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Key highlights:

US will remain the number one market in footwear and accounts for the highest absolute value growth of €15 bn in 2020.

Online footwear market size to grow at a CAGR of 5% which is over €62.6 bn during forecast period 2019-2023.

The kids' segment is poised to exhibit the highest CAGR of 6.3% in revenue during the forecast period 2018-2025

Athletic footwear global market share : Men – 55% ; Women – 30% and Kids – 15%

Athletic footwear market is predicted to reach €54.41 bn by 2026 with 5.1% CAGR throughout the forecast period from 2018 to 2026. Asia Pacific is considered to be the fastest growing region between 2018 and 2026.

The Global Online Footwear Market to grow at a CAGR of 4.98% during the period 2019-2023.

China is the digital powerhouse in Asia-Pacific and the world. E-commerce sales reached €319 bn in 2016 when it became the largest channel in the country, accounting for 17% of total retail sales. In that same year, China's e- commerce market surpassed the U.S. to become the largest market in the world.

2018 2025

181 €240 €

Global footwear revenue in billion Euro's

North America40.10%

Europe21.78%

APAC28.29%

RoW9.83%

Source: https://www.reuters.com/brandfeatures/venture-capital/article?id=79130 https://www.businesswire.com/news/home/20170710006215/en/Global-Footwear-Market-Boom-Progressive-Manufacturing-Strategies

Profit & Loss report – FY18Profit & Loss report – FY18

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Brand names

Cole Haan, Converse, Hurley, Nike Golf, Umbro

Reebok, Taylormade, Runtastic

Haglofs, Onitsuka Tiger, Fitnesskeeper Inc,

Cobra Golf, Carrspace, Genesis Group International Ltd, Brandon AB, ATA ltd, A.C.K, Dobotex B.V

Mapmyfitness, My Fitness Pal, Endomondo

Madden Girl, Betsey Johnson, Superga, Freebird, Mad Love, Blondo

Skechers USA Deutschland GmbH, Skechers China Ltd, Duncan Investments, Skechers USA

Hanover Shoe, C&J Clark America Inc, Clarks Japan, Clarks overseas ltd

Market Cap (€) €113.88bn €55.175bn €2.4bn €9.6bn €8.07bn €2.3bn €4.72bn -

Headquarter Beaverton, Oregon, USA

Herzogenaurach, Germany

Kobe, Hyogo prefecture, Japan

Herzogenaurach, Bavaria, Germany

Baltimore, Maryland, USA

Long Island City, New York, USA

Manhattan Beach, California, USA

Street, Somerset, England

Employees 73,1002% decrease

57,01613% decrease

8,8233% increase

12,8947% increase

15,0005% decrease

2,6004% increase

5,40020% increase 15,380

Financial

Revenue (est.) €32.4bn €21.92bn €3.2bn €4.6bn €4.6bn €1.65bn €4.16bn €1.66bn

Cost of goods €18.1bn €11.02bn €1.7bn €2.3bn €2.5bn €0.92bn €2.15bn €0.876bn

Gross profit €14.2bn €10.9bn €1.5bn €2.2bn €2.08bn €0.55bn €1.99bn €0.78bn

Gross profit % 43.8% 49.7% 46.9% 47.8% 45.2% 33.3% 47.8% 47%

Source: Company Annual ReportsExchange rate 12-Aug-19 : $1 = €0.89

Profit & Loss report – FY18Profit & Loss report – FY18

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Financial

Operating profit/loss €3.92 bn €2.368 bn €0.088 bn €0.3374 bn (€0.022bn) €0.15 bn €0.39 bn €0.031bn

Operating profit/loss % 12.1% 10.8% 2.8% 7.3% -0.5% 9.1% 9.4% 1.9%

Net Income €1.7bn €1.7bn (€0.17bn) €0.08bn (€0.042bn) €0.12bn €0.33bn (€0.03bn)

Net Income % 5.3% 7.7% -5.3% 1.7% -0.89% 7.3% 7.9% -1.80%

E-commercerevenue €2 bn – – – – – – –

Exchange rate 12-Aug-19 : $1 = €0.89

Operating

Own Stores 1,182 - FY18 2,395 - FY18 899 – FY18 355 – FY17 319 – FY18) 229 – FY18 690 - FY18 1,400

Source: Company Annual Reports

Net income and revenue of footwear brandsNet income and revenue of footwear brands

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2,918

3,352

3,780

1,720

6861,020 1,100

1,700

206 22943 4196 108 106 116

2015 2016 2017 2018

Net Income – Millions in €

Nike Adidas Under Armour Steve Madden

27.228.8

30.532.4

16.919.3

21.2 21.9

3.5 4.3 4.4 4.6

1.2 1.2 1.3 1.6

2015 2016 2017 2018

Revenue – Billions in €

Nike Adidas Under Armour Steve Madden

Source: Company Annual Reports

Reason for the drastic drop in Net Income are: Foreign exchange rate fluctuations Higher administrative and marketing costs Increased overhead expenses High effective tax rate Rise in cost of sales

Nike performance and strategiesNike performance and strategies

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(Values in € millions) 2018 2019E 2020E 2021E 2022E

Revenue 32,965 36,242 39,748 43,246 46,970

YOY 6% 10% 10% 9% 9%

Men57%Women

22%

Young Athletes

17%

Others4%

Nike’s current plan defines the women segment as one of the core markets where the company sees tremendous potential to grow, planning to double sales from 5.16 billion in 2015 to 9.96 billion EUR in 2020. In order to achieve the sales target, the company is allocating more retail space for Women’s products in its stores, announcing the creation of Nike Pants studio on its stores and digital platforms, offering more style choices and options for every type of woman workout. Moreover, the company opened Nike women exclusive stores in London, Shanghai and Los Angeles and is following Lululemon’s strategy in launching women’s exclusive events, such as Yoga sessions on its stores.

The company is focusing on the development of its Direct to Consumer (DTC) channel, referred by the company as Nike Direct, where sales accounted for 30%. Nike’s Direct growth was driven by sales in self-owned retail stores, where it owns a total 1182 physical stores (790 in the international market and 392 in the United States) with 22% of sales and 12% annual compounded growth. However, Nike digital platforms and mobile phone applications, such as Nike+ and SNKRS app, account with more than 100 million users, generated 8% of the company’s sales and grew at 33% compounded rate which reflects the company focus in the development of its DTC channel.

Source: https://run.unl.pt/bitstream/10362/70543/1/Yao.EtAll_2019.pdf

Nike & Adidas performance and strategiesNike & Adidas performance and strategies

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In the FIFA World Cup, Adidas have been dominant player with the major sponsorship of the event since 1972, it has the exclusive rights in producing the official competition ball and referee’s equipment.

Nike on the other hand has been the dominant brand in the Olympic Games, leading by far the number of gold medalist’sathletes sponsored during the Rio 2016, Olympic Games.

Source: https://run.unl.pt/bitstream/10362/70543/1/Yao.EtAll_2019.pdf

Research FindingsResearch Findings

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Source: https://www.forbes.com/sites/greatspeculations/2019/03/25/after-a-strong-performance-in-q3-2019-would-focus-on-digital-platform-drive-nikesgrowth/#7821b6d635e5

CurrentNike:

Nike has added roughly €6 bn to total revenue since 2015, increasing at an annual rate of 6.5%. Footwear business annual growth rate is 6.8%

Nike’s footwear revenue of €21.6bn was roughly 60% more than that of Adidas €13.4bn

Nike’s marketing expenditure stood at €3.4bn representing roughly 10% of the total revenues.

FutureNike:

Increasing focus on digital platform, upcoming global sports events and increasing partnerships would likely lead to strong sales growth with revenue expected to grow to approx. €37.8bn by FY2020.

Online sales goal by 2020 is €7 bn

CurrentAdidas:

Adidas has added roughly €6.26 bn to total revenue since 2015, increasing at an annual rate of 11.3% and is 70% faster rate than Nike. Footwear business annual growth rate is 17.6%

Adidas has been more aggressive in marketing its products. It’s marketing expenditure stood at €3.13 bn representing roughly 14% of the total revenues.

Double-digit growth in strategic growth areas adidas North America, Greater China, e-commerce.

FutureAdidas:

eCommerce business to expand above € 4 bn by 2020 Adidas supply shortages for North America will be fixed by the end of the year

and that the European market should return to growth.

Research FindingsResearch Findings

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Source: https://fashionunited.com/executive/management/asics-narrows-q4-net-loss-sales-up-3-8-percent/2018021519759

CurrentASICS:

Gross profit increased 3.8% to 1.51 m Euro’s, however net profit fell 16.7% to 0.11 bn Euro’s due to loss incurred on business restructuring in the European region.

Domestic net sales for the year decreased 0.5% to 0.84 bn Euro’s mainly due to weak sales in sportswear, despite steady sales of running shoes. Overseas sales increased 0.5% but decreased 2.6% currency-neutral to 2.47 bn Euro’s, mainly due to weak sales in the American and European regions, despite strong sales of running shoes and Onitsuka Tiger shoes in the Oceania/Southeast and South Asian regions as well as the East Asian region.

FutureASICS:

In 2019, Asics will increase spending on advertising by €0.041 bn compared with 2018. Spending will be targeted on the performance running category, mainly through digital marketing.

Priority area:1. Focus on the Performance Running market in the U.S.2. Accelerate growth in the Chinese market3. Develop the digital business as a new growth Driver4. Convert the apparel business into a profitably growing business

CurrentPUMA:

Puma’s most significant accomplishment in 2018 has been the re-entry into performance Basketball, giving them a powerful new platform in sports and setting a new standard for approaching a sport category through the culture and influences that surround it.

FuturePUMA:

Starting 2019, PUMA will become technical supplier of the Porsche work teams competing in the FIA World Endurance Championship (WEC) and the IMSA WeatherTech SportsCar Championship (IWSC). Additionally, PUMA enters a strategic partnership with Porsche Design, which features engineered products that will perform at the top level and stand for the fusion of lifestyle and performance wear.

Research FindingsResearch Findings

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Source: https://fashionunited.com/executive/management/asics-narrows-q4-net-loss-sales-up-3-8-percent/2018021519759

CurrentUNDER ARMOUR:

Annual net loss for 2018 was €0.042bn, a 4.06% decline from 2017. Income from operations for the year ended December 31, 2018 was

negatively impacted by €164.35 m of restructuring, impairment and related charges in connection with the 2018 restructuring plan.

FutureUNDER ARMOUR:

Under Armour has adapted digital transformation with apps like MapMyFitness, MyFitnessPal (calorie and nutrition app), and Endomondo(fitness app maker). This has enhanced its revenue potential, allowing it to diversify its resources and continue its transformational industrial potential.

65% of its revenue was accumulated through wholesale distribution, whereas 31% was gathered through direct consumer sales.

CurrentCLARKS:

Clarks’ issues are deep-rooted and similar to those of clothing market leader Marks & Spencer in that it struggles to retain relevance to consumers, especially given its midmarket positioning in the age of polarization.

Clarks’ website and social media accounts highlight a more youthful and cooler brand image, helping to shift consumer perception and widen its appeal; however, this modernized brand identity is not always presented in stores.

FutureCLARKS:

Clarks decided to use a solution from software business MuleSoft to make its supply chain more efficient and has signed up MuleSoft partner Whishworksto design and integrate the application suite.

The business is replacing its systems' point-to-point interfaces with a layer of middleware, which means it will be able to make changes more quickly.