Under Armour, NIKE, benefits from Adidas decision on Amazon, eBay, Sterne Agee analyst says

Under Armour, NIKE, benefits from Adidas decision on Amazon, eBay, Sterne Agee analyst says

Adidas’ decision to allow its products to be sold on Amazon and eBay is “an act of desperation” that will benefit Under Armour and, to a lesser extent, Nike, a stock analyst wrote Monday.

“The lack of restriction will likely cause Adidas to become a more promotional brand, and likely suffer the wrath of its better wholesale partners, which would then be very positive for Under Armour,” Sterne Agee analyst Sam Poser wrote in a research report.

Adidas’ decision, announced last week, to allow the sale of its products via e-commerce sites reversed a previous policy — reportedly in response to complaints from British retailer Sports Direct, which wanted to sell soccer jerseys through third-party sites.

Adidas had previously said it wanted its products to be sold only via expert and specialist retailers rather than eBay and Amazon to ensure they were presented “in the best possible way and in the right environment.” The bigger issue, say those who follow the industry, is that Adidas wanted to protect its retail partners’ pricing — so a new jersey selling for $90 at Dick’s Sporting Goods couldn’t be found for half that price on eBay, for example.

On Monday, Adidas, which keeps its North American headquarters in Portland, amended last week’s announcement, saying the old rules will remain in effect in the United States.

But Poser, in a phone interview Monday, questioned the impact of that distinction. He said in a global economy, North American consumers would be able to navigate to an overseas ecommerce site to make purchases if they were so inclined.

“They open that in Europe and you can’t stop it once you open it,” Poser said. “Everything’s global. I can go shopping on a UK website and buy it cheaper. Everything’s global.”

Poser’s report said Adidas would be able issue online presentation standards to sites like Amazon and eBay, “but will not be allowed to dictate pricing. Open market sites are designed to drive sales volume, usually via discounting, with little regard for the perception of the brand.”

Poser speculated that retailers such as Dick’s Sporting Goods, Hibbett Sports and Sports Authority would respond by carrying fewer Adidas products.

“Two such retailers have confirmed our assertion,” Poser writes, and Under Armour “will likely be the largest beneficiary of Adidas’ actions.”

Poser writes:

“Premium sporting goods and athletic specialty retailers will punish Adidas for its decision. Those retailers will increase funding to UA at the expense of Adidas. Nike may benefit a bit but retailers do not want to increase its market share.”

On top of that, Under Armour, which now counts on North America for more than 90 percent of its sales, is looking to expand its international share. Adidas’ move will give Under Armour a boost internationally, Poser says.

Under Armour is gaining market share overall, especially in apparel, “and Adidas is the main donor,” Poser writes.

Under Armour’s apparel market share has grown from 20.2 percent last year to 24.2 percent this year in the United States compared to Adidas declining from 10.7 percent last year to 7.7 percent this year, according to SportScanInfo.

“Under Armour should be thanking Adidas for making such a shortsighted decision,” Poser concludes, referring to the mass on-line retailers decision. “And now UA’s long-term revenue growth opportunities became even more promising.”

— Allan Brettman