Core Viewpoint - UBS analysts express a significantly optimistic outlook for the global sports apparel sector by 2026, anticipating continued growth in market demand, particularly in key markets such as the US, China, and Europe [1][4]. Investment Strategy - The retail sector is expected to maintain a trend of differentiation, with sports apparel and functional brands benefiting from the global health consumption trend. Brands excelling in quality and functionality are favored, while investors should be cautious of macro pressures and brand execution risks [1][2]. - Specific investment opportunities within the softlines retail sector are concentrated in sports apparel and footwear, particularly for globally recognized brands with strong brand equity, innovation, and omnichannel execution capabilities, such as Nike, Under Armour, Adidas, and On Holding [2][7]. Consumer Sentiment - A UBS survey indicates a strong intent among consumers to purchase sports apparel in the next 12 months, particularly favoring high-quality products and brands with good performance, with Nike and Adidas expected to excel in these areas [1][3]. - The survey shows a 2.9% increase in softlines consumption intent compared to the previous year, with a significant acceleration of 535 basis points month-over-month. This indicates a positive shift in consumer sentiment towards softlines retail stocks [3]. Brand Recognition - Brand loyalty and recognition for sports brands are on the rise, with Nike and Adidas showing high consumer awareness globally, especially in China, where their brand recognition significantly outpaces competitors [4][5]. Key Stocks - UBS highlights specific stocks to watch, including Nike, which remains a leader in the industry with strong brand recognition and consumer loyalty. Adidas continues to perform well globally, particularly in Europe. Under Armour is viewed as a potential growth stock despite facing challenges, while Deckers Outdoor, On Holding, and Amer Sports are also noted as stocks with promising future price trends [7].

Core Viewpoint - Adidas has announced a deep technical collaboration with the National Sports General Administration's Sports Science Research Institute to focus on children's sports health and equipment optimization, particularly for its "LIGHTDART" series of children's running and football shoes [1][2]. Group 1: Collaboration and Strategic Goals - The collaboration aims to drive precise iterations of product functionality through rigorous empirical research, providing safer and more professional sports gear for growing children in China [1][3]. - Adidas plans to focus on children aged 7 to 13, viewing children's sports equipment as a significant growth engine for the company in China over the next five years [1][4]. Group 2: Product Development and Research Focus - The "LIGHTDART" series is designed for daily sports and physical testing needs of elementary school students, incorporating advanced technologies from Adidas' flagship ADIZERO shoes [2][3]. - The research will quantitatively analyze the performance of the "LIGHTDART" shoes in real sports scenarios, focusing on energy return, cushioning, and stability for running, as well as support and dynamic follow-through for football [3]. Group 3: Future Directions - Adidas aims to expand its collaborative model with research institutions to build a comprehensive R&D system covering various sports scenarios and growth stages, ensuring the development of reliable sports equipment for children [4].

Core Viewpoint - Adidas has announced a deep technical collaboration with the National Sports General Administration's Sports Science Research Institute, focusing on children's sports health and equipment optimization [1] Group 1: Collaboration Details - The partnership will concentrate on the "LIGHTDART" series of running shoes and children's football shoes, involving technical evaluation, biomechanics research, and shoe last optimization guidance [1] - The collaboration aims to enhance product adaptability and create more professional sports equipment for children in China [1] Group 2: Importance of Children's Sports Equipment - Running is a widely participated sport among children, positively impacting cardiovascular function, bone development, and the formation of exercise habits [1] - Children's foot structure is still developing, necessitating a more detailed understanding of their functional support and equipment needs during sports activities [1] - The design of children's sports equipment must be based on a thorough understanding of physiological development patterns and individual growth differences [1]

Core Insights - Adidas has announced a strategic partnership with the National Sports General Administration's Sports Science Research Institute to focus on children's sports health and equipment optimization [1] - The collaboration will involve systematic technical evaluations, biomechanics research, and shoe last optimization for Adidas's "LIGHTDART" series of children's running shoes and football shoes [1] - The aim is to enhance product functionality through empirical research, providing safer and more professional sports protection for growing children in China [1] Summary by Categories Partnership Details - The partnership will leverage the expertise of a national research institution to quantitatively analyze the performance of the "LIGHTDART" series in real sports scenarios [1] - The research will focus on understanding the movement characteristics of children at different growth stages [1] Product Focus - The "LIGHTDART" series, including running shoes and children's football shoes, will be a key product for evaluation [1] - The study will cover core sports categories, specifically running and football [1] Future Directions - The collaboration will provide clear and sustainable scientific guidance for future product iterations, enhancing overall performance and user experience [1] - The research aims to deepen the existing product foundation and clarify optimization directions for the "LIGHTDART" series [1]

Brand Perception - Adidas is perceived as moving too fast and constantly chasing "newness" [1][2] - The company is excelling in running, but could benefit from leveraging its heritage and cultural relevance, including in basketball [1] - There's a suggestion that slowing down could enhance brand personality and attract more consumers [2] Potential Strategy - Adidas could win more consumer mind share by taking things slower [2] - The company should focus on brand personality to win more consumers [2]

Core Insights - The younger generation seeks a more relaxed and fashionable way to express cultural confidence, which brands like Adidas are tapping into by interpreting traditional Chinese culture through their products [1] Group 1: Consumer Trends - The global consumption market is undergoing deep structural changes, with increasing trends of market segmentation and personalization, necessitating brands to accurately identify and cater to diverse consumer needs [3] - Adidas is diversifying its product offerings in the running category, providing a range of shoes tailored to different types of runners, such as the ADIZERO 0 series for elite runners and the SUPERNOVA series for casual joggers [3] Group 2: Brand Innovation - Adidas has successfully launched its flagship store on Anfu Road in Shanghai, which has become a cultural hub for young consumers and has performed exceptionally well since its opening [5] - The brand is focusing on cross-industry collaborations to enhance product appeal, including a partnership with Chinese designer SAMUELGUÌYANG for a limited New Year collection, which has gained popularity among young consumers and NBA stars [7] Group 3: Financial Performance - Adidas reported a revenue of €2.774 billion in the Greater China region for the first three quarters of 2025, reflecting a 12% year-on-year growth and demonstrating the effectiveness of its localized strategy [9]

Core Insights - Adidas has launched a new collection of "New Chinese Style" jackets for the Spring Festival, featuring various colors and designs, and has engaged 15 celebrities and athletes for marketing [1][3] - The brand has experienced ten consecutive quarters of growth, with double-digit growth in the last four quarters, contrasting with competitors like Anta and Nike [3][12] - The success of the new jacket is attributed to its unique design elements and the effective marketing strategy that resonates with both local and international consumers [3][11] Product Strategy - The "New Chinese Style" jackets incorporate traditional Chinese elements with modern design, appealing to both local and foreign consumers [5][11] - Adidas has established a creative center in Shanghai for over 20 years, focusing on integrating Eastern aesthetics into their design language [11][34] - The brand emphasizes practicality and versatility in its products, ensuring they fit seamlessly into consumers' wardrobes [11][21] Market Positioning - Adidas has adopted a "China for China" strategy, leveraging local creative teams and flexible supply chains to respond quickly to market demands [21][36] - The brand has improved its relationship with distributors, enhancing its presence in lower-tier cities [15][19] - Adidas is focusing on affordable, stylish basics that appeal to younger consumers, with many products priced between 300-500 RMB [15][33] Financial Performance - Despite recent growth, Adidas's revenue in Greater China for the first three quarters of 2025 is estimated at 2.774 billion euros, indicating a decline from 4.428 billion euros in 2020 [36] - The market share in China has decreased from 15% in 2021 to 8.7% in 2024, highlighting ongoing challenges in the competitive landscape [36]

Industry Overview - The Zacks Shoes and Retail Apparel industry is facing persistent pressures from higher input and freight costs, supply-chain inefficiencies, and elevated selling, general and administrative (SG&A) expenses related to digital and store investments, which are negatively impacting margins [1][5] - The industry is also affected by currency volatility, geopolitical uncertainty, and evolving trade and tariff policies, alongside a softer consumer backdrop and a tight labor market [1][5] Consumer Demand Trends - Demand for activewear, footwear, and wellness-focused products remains strong, driven by a broader shift towards healthier lifestyles [2][6] - Companies are leveraging this trend through product innovation, expanded athleisure assortments, and enhanced e-commerce and omnichannel capabilities [2][6] E-Commerce Investments - Digital channels are a major growth engine for the athleisure market, with brands expanding their reach through websites and social media [7] - Investments in faster delivery, supply-chain efficiency, and fulfillment enhancements are sharpening competitive edges, while physical stores are being reimagined to create a seamless omnichannel experience [7] Industry Performance - The Zacks Shoes and Retail Apparel industry has underperformed the broader Zacks Consumer Discretionary sector and the S&P 500 over the past year, with a collective decline of 18.9% [12] - The industry's current Zacks Industry Rank is 180, placing it in the bottom 25% of over 250 Zacks industries, indicating dull prospects for the near term [9][10] Valuation Metrics - The industry is currently trading at a forward 12-month price-to-earnings (P/E) ratio of 26.34X, compared to the S&P 500's 23.44X and the sector's 18.19X [13] - Over the last five years, the industry's P/E ratio has ranged from a high of 38.15X to a low of 20.83X, with a median of 27.10X [13] Key Companies - **Steven Madden**: Positioned for durable upside through a strategic shift towards higher-margin direct-to-consumer channels, with a focus on online and owned-store growth [17][18] - **NIKE**: Set to benefit from its Consumer Direct Acceleration strategy, focusing on sports and product innovation while reducing reliance on promotions [20][22] - **Adidas**: Poised for growth due to strong demand and improved margins from price increases and a better channel mix [24][25] - **Wolverine**: Focused on brand structure and efficiency improvements, with a strong emphasis on direct-to-consumer business [28][29] - **Caleres**: Improving investment case supported by strong brand momentum and cost discipline, with a focus on inventory management [32][33]

Core Viewpoint - Adidas has won a ruling from the U.S. Ninth Circuit Court of Appeals, dismissing allegations that it misled investors regarding risks associated with its partnership with Yeezy, which had led to a decline in stock price following the termination of the collaboration [1] Group 1 - The termination of the partnership with Ye resulted in a drop in Adidas's stock price [1] - The U.S. Ninth Circuit Court of Appeals ruled in favor of Adidas, rejecting claims of investor misrepresentation related to the Yeezy collaboration [1]

Investment Rating - The investment rating for the textile, apparel, and luxury goods industry is "Positive" and maintained [9] Core Insights - The report summarizes the Q3 2025 financial performance of overseas sports brands, highlighting sales performance, profitability, and inventory status, indicating a gradual improvement in overall performance [2][4] - Revenue performance among major footwear and apparel companies shows divergence, with some brands experiencing strong growth while others face challenges [5][6] - The outlook for the industry suggests a gradual recovery in demand and inventory replenishment, particularly for brands like Adidas and On, while Nike continues to face headwinds [8][36] Revenue Performance - Revenue growth varied significantly among companies in Q3 2025, with Adidas (+12%), On (+35%), and Amer Sports (+30%) showing strong growth, while Nike and VF both reported a decline of -1% [5][19] - The overall revenue performance in Q3 2025 improved compared to Q2, despite some brands continuing to face pressure [5][6] Guidance - The visibility for the full year has improved, with brands like UA restoring full-year guidance, indicating a positive trend despite expected performance divergence [6][26] - Strong growth trends are expected to continue for On and Amer Sports, while Nike and VF are projected to see declines but with signs of improvement [6][31] Inventory - The industry is entering a phase of inventory replenishment, with moderate recovery in demand observed in the U.S. and Europe, although challenges remain in certain markets [7][36] - U.S. apparel inventory levels are in a destocking phase, with wholesale inventory ratios declining since 2023, while retail inventory levels have stabilized [7][36] Future Outlook - The industry is expected to gradually transition into a replenishment phase, with demand showing signs of recovery, particularly in the U.S. apparel sector [8][36] - Brands like Adidas are actively seeking to replenish inventory for growth, while Nike continues to destock amid ongoing challenges [8][36]