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Nike, Peloton and Adidas: the sports winners of the covid are left behind

Date: June 1, 2023 Time: 17:18:17

Houses around the world were filled with sports equipment when all you could do was bake bread, make a daily foray to the dumpster, and stretch in front of the television. It was 2020 and treadmills, tights and sports shoes, and even swimming pools and rollers, managed to gain space in homes that were going through quarantine. The sports fever will happen that some fitness companies will skyrocket in the stock market and grow at great speed on foundations that have crumbled months later, layoffs, closures, ‘profit warnings’ and red numbers will appear that do not stop growing. The bursting of the bubble has also splashed the kings of sports such as Nike and Adidas, immersed in a perfect storm to which are added a communication crisis and the impact of China.

The rise and fall of home fitness is embodied like no other by Peloton. The New York-based company markets Internet-connected stationary bikes, treadmills and indoor rowers that broadcast live and on-demand fitness classes via subscription and was a huge sensation in the early months of the pandemic. A few months before the outbreak of the Covid-19, the company had given the bell by jumping to the New York Stock Exchange with a valuation of 8,200 million dollars. The company’s planes went through becoming strong in Europe and increasing the rate of store openings, but the pandemic arrived and Peloton was gorged with success.

The company’s stock market value increased fivefold, to $42 billion. Billing doubled, up to 1,462 million dollars, and reduced its losses to 71.6 million euros. Subscriptions skyrocketed and the chain reached several quarters of profit, something unprecedented so far, achievements that earned it to announce the expansion of its facilities in Texas and increase its staff.

Billing continued to grow in 2021 and doubled again, but with it, the red numbers were increasingly bulky and operating expenses were on the rise. The new normality achieved a Squad with homework to do. The company had to lower its expectations, end in-house manufacturing to simplify the supply chain, and reduce its chain of stores as prices rose. The dream of stationary bikes was fading as losses rocked the top and prompted the departure of its own founders, John Foley and Hisao Kushi, and more than 5,000 employees, in a desperate attempt to restructure the company.

The rise and fall of the company is reflected in the park. Peloton’s share, which during the pandemic reached a price of $171, giving the company a value of $50 billion, closed 2022 with a value per share of $7.9.

Other companies that capitalized on the home fitness boom have had trouble dealing with the hangover from the party. The American IFIT, a direct competitor of Peloton, delayed its plans to go public in April 2022 due to “adverse market conditions” and The Beachbody Company, an online fitness platform, increased its losses by 81% in the first three quarters of the year

In Spain, Fluidra has also had to navigate the end of the bubble. The Spanish pool and wellness company returned to business as usual in the 2022 financial year after two years of high activity and supply chain disruptions, but it has not been a soft landing. Although it estimates a growth of 10% in the last year ended on December 31, 2022, it has had to reduce its estimates throughout the year. The loss of rhythm has cost the Catalan listed company dearly on the market, which in 2022 left 56% of its value on the stock market, the worst data on the Ibex. In addition, analysts foresee further profit warnings due to inventory problems and falling demand.

The kings of sports fashion also cry

The bursting of the fitness bubble has also affected the giants of sports fashion, which have closed a black year weighed down by supply problems and the drop in sales in the Chinese market.

A paradigmatic case has been that of Nike, the unbeatable leader in the sportswear sector. The company ended the first half of the year (from June to November) with a 10% increase in sales, but with a 13% drop in profit.

The company attributed the decline to rising costs of raw materials and logistics, and the need to make further discounts to liquidate inventory. As for sales, the main drag was the Chinese market, where Nike’s business contracted 9.9% in the period.

The problems in the Asian giant have been going on since 2021, when some brands, including Nike and Adidas, were affected by a boycott after positioning themselves against the conditions of forced labor to which the Muslim minority in Xinjiang is subjected. where cotton is grown

To this is added a growing preference for consumption of local brands (called guochao) and the harsh impact of the Covid Zero policies, which led to the confinement of some of the main metropolises of the country.

adidas. The company is in a turbulent time after the break with Kanye West, adding to the impact of the lockdowns in China. Problems that the new CEO of the company will have to face, Bjørn Gulden, who joined Adidas on January 1, jumping directly from Puma.

In the first nine months of the year, Adidas increased its sales by 7.5%, but reduced its net result by 40.8%. In addition, the company’s inventory shot up 72%, up to 6,315 million euros, while its debt doubled. Turnarounds for the German banner are expected to be slow: Gulden is building a new marketing and design team and has yet to develop a new product strategy, so Credit Suisse says there won’t be results until 2025.

Despite the different directions the two companies have taken, investors are punishing both. Adidas has left almost 60% of its value on the floor, while Nike has fallen almost 30% over the past year, despite a final comeback in the last weeks of the year with the publication of results that encourage recovery .

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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