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Adidas Cements U.S. Comeback as It Surpasses Under Armour

Long-standing Adidas CEO Herbert Hainer may be on his way out, but he can celebrate one last victory in the form of Adidas’ latest sales numbers.

The German footwear maker reported its second quarter earnings on Wednesday, posting a sales increase of 21 percent, including a 26 percent jump in North American sales.

Lagging performance in the North American market was widely reported as one of the major drivers behind the decision to oust Hainer, who has been with the company since 2001 and will be replaced by Kasper Rorsted starting in October.

But the company’s fortunes have turned around, and Adidas now finds itself riding high in the marketplace, largely on the successful comebacks of its Stan Smith trainer and Superstar basketball shoe. It’s collaborations with Kanye West and Pharrell Williams have also given the brand a much-needed publicity boost.

This has all helped Adidas reclaim its position as the second-largest U.S. sportswear brand, surpassing Under Armour, which overtook the company last year in total sales. For the second quarter of 2016, Adidas reported U.S. sales of $890.1 million, putting it above Under Armour, which had sales of $827.1 million in its most recent quarter.

Top-line growth was also strong in the shoemaker’s Western European backyard, where sales grew by 29 percent. Sales in Greater China were up 30 percent, and after cutting the company’s Russian presence in the wake of a currency free-fall, sales there are now up a modest 7 percent.

In light of strong U.S. and global sales growth, Adidas Group increased its 2016 financial outlook. The company says it now expects sales to increase at a rate in the high teens, up from the previous outlook of 15 percent growth.

Hainer was jubilant in the company’s report, “The stellar financial performance in the second quarter is proof positive that our strategy is paying off,” he said. “I saved the best for last.”

When Hainer hands over the reigns to Rorsted, he will have his work cut out for him. While these latest results bode well for Adidas, the company still lags far behind Nike, and its operating margins need improving. Last year Adidas posted margins of 6.5%, far behind Nike’s 13.9% margins, and says it’s currently on track to hit margins of 7.5% by the end of 2016.