As the landscape of the sneaker market changes, the performance of related companies reflects a mix of fortunes. Last year, as the absolute powerhouse Nike struggled in popularity among the younger generation, Adidas, New Balance, and Asics recorded strong performances.
◇Hwaseung Enterprise smiling with Adidas' revival
According to the Financial Supervisory Service on the 25th, Hwaseung Enterprise, an order developer and manufacturer (ODM) producing Adidas sneakers, saw its revenue last year reach 1.6096 trillion won, a 33% increase from the previous year. During the same period, operating profit rose to 82.6 billion won, nearly six times higher than the previous year (13 billion won). Net profit turned to a surplus of 34.3 billion won.
Hwaseung Enterprise, which has Adidas as a client, received evaluations for its unusual growth thanks to Adidas' revival. Last year, 91% of its revenue was generated from Adidas. It is reported that the proportion of Originals products like Samba, Gazelle, and Superstar rose beginning in the fourth quarter, leading to improved operational rates.
Hwaseung Industries, the parent company of Hwaseung Enterprise, also saw a 25% increase in consolidated revenue last year, with operating profit rising to 189.2 billion won, about seven times more than the previous year (24.7 billion won). Hwaseung Industries supplies materials and supplies to Hwaseung Enterprise, which then manufactures products (such as sneakers) for delivery to Adidas.
Globally, Adidas' status is growing. The brand's revenue last year was approximately 23.7 billion euros (about 37 trillion won), a 10% increase from the previous year. Operating profit soared from 268 million euros (42.14 billion won) in 2023 to 1.337 billion euros (210.72 billion won). Adidas' stock price rose over 30% last year, surpassing Nike.
Although the Korean operation is a limited liability company and does not publicly disclose revenue, according to the Adidas global performance announcement earlier this month, the total revenue from Korea and Japan last year reached 2.1072 trillion won, a 3.6% increase from the previous year. Adidas executives expect the brand's revenue to grow in double digits this year, with operating profit estimated to be between 1.7 billion and 1.8 billion euros (2.6733 trillion to 2.8306 trillion won).
◇Taking advantage of Nike's decline... New Balance and Asics also posting strong results
Adidas faced difficulties after parting ways with hip-hop musician Ye (formerly Kanye West) in 2022, who had collaborated on the 'Yeezy' line, resulting in taking on unsold inventory worth about 1.7 trillion won. Consequently, its key client, Hwaseung Enterprise, was also hit hard. However, recently, flagship products from the 1990s, such as Samba, Gazelle, and Superstar, have made a comeback, particularly gaining traction among Generation Z (those born from the mid-1990s to the mid-2000s).
There are also analyses suggesting that while its competitor Nike focused on selling 'limited edition' products, Adidas seized new opportunities. The fact that Adidas has specialized products for various sports, including running, soccer, basketball, and tennis, is noted as a strength. Additionally, it is viewed that Nike's acceleration of direct-to-consumer (D2C) sales through its own online mall during the COVID-19 pandemic led to an unintended consequence of increased attention towards competing brands in the offline market.
This atmosphere is also reflected in the domestic market. New Balance Korea surpassed 1 trillion won in revenue for the first time last year, marking its 16th year in the domestic market. Asics Korea also reported a 31% increase in revenue year-on-year, reaching 143.7 billion won, with operating profit rising 73% to 23.5 billion won. During this period, net profit was recorded at 19.5 billion won, a 55% increase.
Nike Korea, which closes its accounts in June, seems to continue its sluggish trend this year as well. In 2023, Nike Korea's revenue and operating profit decreased by 0.3% and 43%, respectively.
The global Nike financial year third quarter revenue announced on the 20th (local time) was $11.3 billion, a 9% decrease from the same period last year. Net profit declined by 32% to $800 million. Matt Friend, Nike's Chief Financial Officer, noted during a conference call, 'The decrease in revenue for the fiscal year fourth quarter is expected to be in the low 10%' and explained that 'geopolitical dynamics, new tariffs, unstable exchange rates, and tax regulations are some of the factors causing uncertainty.'