What's going on?

Shares of Adidas (ever wonder how it got the name?) jumped almost 10% on Wednesday after the German sportswear company said its profitability is improving amid growing sales in China, the US � and, especially, online.

What does this mean?

Adidas stumbled for a number of years � but its performance has improved dramatically since its new CEO took over in 2016. It�s benefited partly from an increased focus on fashion over sports, partnering with the likes of Pharrell Williams and Kanye West to reimagine some of its old-school sneakers as 21st-century kicks. Overall sales in China and the US each grew by about 35% last year; considering the US market for sportswear in general remained pretty static, this is huge growth. Overall online sales, meanwhile, grew 57% � which should help boost Adidas�s future profitability�

Why should I care?

The bigger picture: Some brands are thriving in an increasingly ecommerce-driven world.

It�s no secret that retail has been upended by consumers� shift to online shopping, but the challenge posed by the likes of Amazon is perhaps more acute for middlemen retailers like Foot Locker. As Adidas�s online sales growth shows, customers still want to buy products from established brands; they just want to do it online. The change can actually benefit brands like Adidas because it�s able to sell its products directly to its customers, cutting out the middleman and stuffing more profit in its own gym bag.


For markets: Adidas� story is becoming about profitability, rather than just growth.

Prior to Wednesday, Adidas shares were actually down 15% over the previous six months as investors grew concerned that it wouldn�t be able to maintain its recent sales growth. But Adidas�s announcement on Wednesday that it expects faster margin growth in the coming years (a.k.a. better profitability), largely because of its increasing online sales, has left investors with that new-shoes feeling.