Consumer confidence is very robust in Germany, the USA, China and Japan despite many and varied political developments. At first sight this creates a conducive environment for global retail and consumer goods companies, such as adidas, Beiersdorf, Henkel, Puma and Hugo Boss, to continue to deliver a good performance.
But looking at the business performance in the first quarter the picture is spoiled from the point of view of German companies above all by the following influences: 1) Strong headwind from the currency side due to the euro’s strength against nearly all currencies of the larger established economies, and also against the currencies of many emerging market countries: negative currency translation effects are dampening sales revenues and profits reported in domestic currency. 2) Prices for raw materials are posting another steep increase; this is clearly reflected in the marked increase in crude oil prices compared to the previous year. In addition, the traditional high-street business remains the problem child of the German fashion retail segment as online competitors increasingly take over.
In this current environment the leading international sports article manufacturers, which also include adidas and Puma, are nevertheless fundamentally well positioned. We believe these companies have also continued to benefit from their flourishing business in China. The Chinese population’s health-awareness is permanently increasing. Once again, these companies will pay very close attention to the development of the online business as increasing shares of the online business in group sales revenues usually entail a disproportionately great increase in profit-margin growth. Sports article manufacturers belong to the “cyclical consumption” category. Compared to companies from cyclical sectors such as automobiles, engineering and steel, sports articles have an advantage that should not be underestimated: they are hardly affected by all the discussions about import tariffs. Not least for this reason are the shares of this stock category very sought after at the moment regardless of their specific characteristics and valuation issues.