Adidas hails retail gains for ‘solid’ revenue growth

Adidas has hailed the expansion of its own branded stores and partnerships with retailers for delivering “solid” revenues in its latest quarter, a positive sign for the group after it was forced to scrap its annual revenue and net income targets for 2014 earlier this year.

Adidas has been ramping up its retail offering to support brands such as Originals (above).
Adidas has been ramping up its retail offering to support brands such as Originals (above).

The sportswear maker has been opening new stores and running more co-branded campaigns with key retailers such as JD Sports and Footlocker in an attempt to exploit the start of the domestic club football and school seasons.

Adidas accelerated its retail expansion plans after it poor demand for its TaylorMade Adidas Golf products and abandoned retail plans in Russia forced it to abandon plans to generate roughly €17bn (£13.5bn) in sales by the end of the year.

The strategy led to a 21% year-on-year increase in retail revenue and a 6% jump in wholesale in the three months to September. Both contributed to global revenue rising 6% to €4.118bn in the period with all regions apart from North America posting strong gains.

The marketing outlay in the period as well as other costs incurred from the business restructuring around global brand teams dented profit margins. Profit margin slumped 1.9% to 47.4% as operating expenses increased 4% to €1.6bn.

By brand, revenue at Adidas rocketed 11%, driven by its football and Boost running categories as well as its Neo apparel range for teens.

Sales at Reebok rose 6% in the quarter, primarily due to its fitness range and Classics brand. Rebook’s performance reflects a successful turnaround for the business over the last 18 months, which has given birth to recent rumours that Adidas may be prepared to sell it off.

Herbert Hainer, chief executive of Adidas Group, says the business would accelerate investments in its retail and wholesale channels to maintain the sales momentum. Sales will rise at a mid-to-high single digital rate to €16bn in 2014, boosted by its exposure to fast growing merging markets and the continued expansion of retail.

The plan will continue into the new year with Adidas spreading investment across its own branded stores, third-party retailers and ecommerce to develop its brands and products amongst cutthroat competition.

“In any sport, to reach your goals, tactics and desire are critical to compete and win. We are here to do both,” adds Hainer. “At the same time, we will use 2015 to prepare the ground for our next strategic plan, where we will take the powerful capabilities we have built over Route 2015 and apply them with more vigour and intent to unlock the potential of our brands. We will present our vision for the future in March 2015.”

The vision will present the alternative to the company’s scrapped Route 2015 to generate €17bn sales next year.

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