Claudia Klingelhöfer
Claudia Klingelhöfer (editor in chief)

Adidas 2018 balance sheet press conference: Revenue and profits are climbing

Adidas CEO Kasper Rorsted Wants to Outpace Nike with Digital Strategy

CEO Kasper Rorsted didn’t just present strong numbers and record revenue at the Adidas balance press conference, he also set a clear direction for the coming years. The sporting goods manufacturer is clearly positioning itself for its self-imposed goal of becoming the world’s best sporting goods company and thus knocking Nike off the throne. The subsequent digitalization is just one of six key strategies to this end at Adidas.

Basketballer James Harden is one of the most prominent Adidas wearers in the USA.
Basketballer James Harden is one of the most prominent Adidas wearers in the USA.

“Creating the New” – that’s the name of the five-year strategy Adidas issued in 2015. Now Adidas is in “full execution mode,” says CEO Kasper Rorsted at the very beginning of the press conference. And things have gone very successfully so far: Adidas cracked 20 billion euros in revenue for the first time in the 2017 fiscal year, and rose sales volumes to 21.2 billion euros (an increase of 15 percent).

Profits also rose in the 2017 fiscal year, to 1.43 billion euros. But more important to CEO Rorsted at the 2018 balance press conference are the long-term goals. This includes “high-grade revenue growth with overproportionate increases in profits”: Adidas aims to tweak its profit margin to 11.5 percent in 2020. In 2017 the company was at 9.8 percent, with between 10.3 and 10.5 percent expected for 2018.

And these are the most important strategic points for reaching this goal:

1. Adidas sees itself as a digital company

“We’ve become a digital company,” says Kasper Rorsted. Part of this, for example, is the fact that (according to Rorsted) 90 percent of the marketing budget will already be given over to digital campaigns and social media. “We can thus interact with consumer and be where they are.” At the same time, they are a very young company. For the employees, there is no “digital transformation,” as they “already are digital” and have a high affinity for digital topics.

Furthermore, according to Rorsted, Adidas is now gaining lots of insight from Big Data and digital analyses. With 3D printing and in the Speedfactory, the production processes are as digitized as much as possible.

When it comes to revenue growth, e-commerce far outstripped all distribution channels last year at a growth of 57 percent.

2. Adidas’ increased focus on the US

They now understand the USA better, the Adidas CEO said. A 27 percent growth for North America proves him right. Besides e-commerce and the business in China, North America is a strategic growth area for Adidas and one of the “main drivers for success,” says Rorsted. In the US it’s important to service the key businesses of football, baseball, and basketball, not soccer like in Europe. In addition there are, of course, several global trends coming out of the US.

Music stars Kanye West and Pharrell Williams would have been an enormous help for Adidas’ lifestyle division here. The CEO is cautious about the positive development compared to competitors Nike and Under Armour: Adidas also started from a weaker foundation, and expectations in the competition are made much higher with the positive headlines of recent years.

3. Adidas with a focused portfolio

Adidas is concentrating on its core brands and Reebok. For example, brands like Adidas Neo and Originals are strong growth engines. Both the golf subsidiary TaylorMade and the ice hockey brand CCM were sold (at a loss). Reebok is set to be profitably positioned again within a few years.

For this purpose, a “very hip” headquarters in Boston was set up and everything was centralized there. “Cool designers like Victoria Beckham,” focusing, and a digital business model are set to be further supports for the turnaround. “The challenge isn’t the growth in itself,” said Rorsted about Reebok, “it’s in the profitability.”

4. Adidas is focusing on speed

Important above all for the sporting goods manufacturer is high speed in production and delivery. “We need to make sure that products don’t sell out in high demand,” said Rorsted. This includes the introduction of the Speedfactorys in Ansbach (Germany) and Georgia (USA) for fast but individually produced products.

5. Adidas is putting its marketing focus on six key cities

London, New York, Los Angeles, Tokyo, Shanghai, and Paris are the six cities that, from Adidas’ perspective, have an international signal effect and a global marketing influence. There was disproportionately high investment here – in marketing campaigns, infrastructures, and initiatives.

"Beyond that, it’s no longer a matter of establishing a classic distribution," board director Roland Auschel also says in an interview, “The question today is: How many of these stores will we as a brand really need in the digital future?”

6. Adidas supporting its own innovations with open source

“We’re using open source to make sure we bring cool products to the market,” says Rorsted. This is complementary to Adidas’ own innovations. One example of this is the collaboration with the natural protection organization Parley for the Ocean. Here, more than one million shoes were produced from plastic waste last year.

Zwischensohle aus dem 3D-Drucker: Mit dem Futurecraft 4D geht Adidas revolutionäre Wege. Bald kann ein passgenauer Schuh innerhalb eines Tages individualisiert hergestellt werden. 
Adidas is leading the way in terms of digitalization. Examples: the Speedfactory and the new Futurecraft 4D. Adidas Executive Board Member Roland Auschel explains in an interview what this means for production and processes.

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Claudia Klingelhöfer
Claudia Klingelhöfer (editor in chief)
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