MLS biggest beneficiary in US of adidas' increased marketing spend

HERZOGENAURACH, Germany: adidas has majorly upped its marketing spends till 2020 on the back of soaring sales in consecutive quarters.

The German sportswear giant, which announced an extension of its partnership with North America's Major League Soccer (MLS) on Wednesday, has seen sales grow 28 per cent in China and 26 per cent in North America in the last quarter. 

A Forbes report pegs the new six-year deal signed by the sportswear maker as the official apparel supplier for the league, its clubs and their affiliated youth programs at $700 million. This is considered the biggest sponsorship deal in MLS history and could well mark adidas' biggest investment in North American soccer thus far. 

"It is by far the biggest deal in the history of our league," MLS commissioner Don Garber told Forbes, "This deal, in my perspective, helps solidify our position as the leading soccer property in North America."

adidas' partnership with the MLS began in 2004 with a reported annual $25 million paid by the sportswear manufacturer. The extended partnership will pump in additional monies into Generation adidas, the player development programme that offers early entry to homegrown players into the league, as also into Generation adidas Canada, a similar programme for Canadian players.

A Reuters report pegs adidas' marketing budgets for the next four years at $829-$948 million. adidas' chief rivals Nike and Under Armour on the other hand, have reported flat sales in N America in the latest quarter and are even contemplating job cuts to stay ahead in the race.

Under Armour, which just posted its second quarter results, has reported a 2 per cent decline in footwear revenue, the segment in which it hoped to provide stiff competition to adidas and Nike. A Bloomberg report notes that Under Armour has announced a restructuring plan and cut its annual sales forecast for 2017. 

adidas on the other hand, saw net income from continuing operations grow 16 per cent to €347 million in the quarter gone by, and projects net income to increase at a rate between 26 per cent and 28 per cent.

adidas CEO Kasper Rorsted has said that the strong growth in both sales and net income from continuing operations is testament to "the continued momentum our brands enjoy across our key regions and channels. We will grow both our top and our bottom line faster than originally anticipated."

Due to the strong financial performance in the first half of 2017, adidas has increased its 2017 financial outlook. The company now expects sales to increase at a rate between 17 per cent and 19 per cent (previously: to increase at a rate between 12 per cent and 14 per cent) on a currency-neutral basis in 2017.