Why Does Adidas Look At The Chinese Market So Much?

According to the world clothing shoes and hats net, the world's second sporting goods group Adidas AG (ADS.DE)

Kasper Rorsted, the group's chief executive, launched his first visit to China. He said he would continue to expand in the group's most important Chinese market, while implementing the strategy of "younger" and "secondary city", and expected that the long-term operating profit margin of the Chinese market would shrink.

At present, the Chinese market is the second largest market of Adidas AG, Adidas group, which accounted for 16% in 2016, slightly lower than that in the US market. In 2013, the group US market was two times that of China.

The size of the Chinese market is shrinking, except for the past few years.

Another important reason for the downturn in the US market is the rapid growth of the Chinese market.

In 2020, Kasper Rorsted said in a media interview in Shanghai that by 2020, the group will add 2000 stores to 12000 stores on the basis of 10000 stores in the Chinese market, because the Chinese market still has great potential.

By the end of December, in the 2016 fiscal year, the fixed income exchange rate of Adidas AG, Adidas group, including Mainland China, Hongkong and Taiwan, surged 27.5% to 3 billion euros.

Kasper Rorsted said that in 2019, the group will expand the two distribution centers in China's Suzhou and Tianjin to 3.

In addition to sales, what is more frightening is the operating profit margin of Adidas AG Adidas group in China. Kasper Rorsted Rorsted said that its operating profit margin in China last year reached 35%.

This operating margin almost surpasses all the luxury brand's operating margins.

In 2016, Herm s International SCA SCA (RMS.PA)

The operating profit margin of the international group is 32.6%, and the company's operating profit margin is at the forefront of the luxury goods industry.

According to fashion industry research and consulting investment agency No Agency data, Louis Vuttion Vuttion Louis Weedon's operating profit margin has not been disclosed for any data at around 33%. In addition to the two brands mentioned above, none of the traditional brands in the luxury goods industry can reach 30% in 2016. The Gucci profit recovery rate of Gucci, which is strongly restored, is 28.7%, and the Prada SpA Prada group, whose revenues and profits have continued to decline for three years, has a EBITDA profit margin of 20.5% in the 2016 fiscal year.

Although China's National Bureau of Statistics announced the best data in the six quarter of 6.9% in the first quarter of the year, Kasper Rorsted also expressed cautious prudence in the Chinese market. He said that if the whole industry was focused on, China's retail industry was slowing down.

He also said that at present, the slow growth of the entity market and the decline in the volume of shopping centres is an irresistible trend.

In addition, when it comes to Donald Trump's "made in America", Kasper Rorsted Rorsted said that the scale of manufacturing in Asia is huge. If the factory is moved to Europe or the United States, it is against the basic economic laws, and the manufacturing automation level in Asia is very high.

Compared with high operating profit margins in China, Kasper Rorsted said the group's operating profit margin in the US market was 6.3% last year, but this data has been doubled from 2.5% in 2015.

But he pointed out that in the long run, the operating profit margins of the two big markets will be reversed, mainly because the growth of the Chinese market will naturally slow down over time.

Kasper Rorsted said in its annual report meeting at the beginning of March that the group was still catching up in the North American market. He pointed out that although the United States accounts for 1/3 in the global sporting goods market, it is the only market far behind the Nike Inc. NYSE:NKE (Nike) group.

The United States is at a priority level in the strategy of Adidas AG, Adidas group, and the future group will continue to "disproportionately increase" investment in the us from personnel, infrastructure and marketing. The main retailers of the country, Foot Locker Inc. NYSE:FL (NYSE:FL) and Dicks Sporting Goods Inc. (NYSE:DKS), are optimistic about their prospects.

At present, the profitability of Adidas AG Adidas group has been running out of Nike Inc. Nike group. In the 2016 fiscal year, the net profit margin of the former business was 5.3%, though it has been 100 basis points higher than the previous year, but it is still far behind the 11.6% net profit margin recorded by Nike Inc. and Nike group in the 2016 fiscal year ended May 31, 2016.

In early March, when Kasper Rorsted released its first annual meeting of Adidas AG, Adidas group, under its leadership, the group set the target of annual average growth of 10%-12% for fixed exchange rate and average annual growth of net profit of continuing business for the next 4 years. The previous two indicators were expected to have a high figure and 15% respectively.

Kasper Rorsted said that the performance in fiscal year 2016 and the positive prospects in the 2017 fiscal year all confirm the success of the current strategy.

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Kasper Rorsted, who took office last September and became the new CEO of Adidas AG Adidas group, intends to inherit the former Herbert Hainer strategy, and continues to bet on the high growth market in leisure sports and in the United States and China, so as to narrow the gap with the industry's one Nike Inc. Nike group, and at the same time pull away the distance from Under Armour Inc. Inc. (Under) and Andemar (Puma).

In the 2016 fiscal year, the net sales of Adidas group Adidas AG increased by 14% to 19 billion 291 million euros, which basically met the market expectations of 19 billion 300 million euros, the fixed exchange rate rose 18%, the net profit of continuing operations increased by 41.5% to 1 billion 19 million euros, and the EPS of continuing business rose from 3.54 euros to 4.99 euros, which was better than the market expected Euro 4.88 euros.

After issuing the annual performance of the expected net profit of 1 billion euros, the net sales of the fixed exchange rate system will increase by 11%-13% annually in the current 2017 fiscal year, and the net profit of the continuing business will further increase from 18%-20% to 12-12.25 billion euro, which is better than the expected market value of Adidas billion euros in the current 2017 fiscal year.

The operating profit margin is also expected to increase from 7.7% in fiscal year 2016 to 8.3%-8.5%, while the operating profit target in 2020 is 11%. The operating profit margin of Nike Inc. Nike group in 2016 fiscal year has reached 14.2%.

In addition to Kasper Rorsted's visit to China this week, the company became the focus of social media because of a bad Email this week.

On Tuesday, congratulating Boston marathon runner's mail, Adidas Adidas called them "survivors", which led the outside world to suspect that they were "humorous" by the 2013 Boston marathon explosion.

Subsequently, the brand issued an open letter in Twitter, apologizing for the above actions.

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