A Quarter Of The Slowdown In Sales Growth, ADI Will Bet On The Electricity Supplier Against Nike?

Adidas wants to rely on e-commerce against Nike?

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Increasingly fierce competition, Adidas seems to bet on electricity providers to seek new growth momentum.

German sports brand group Adidas ADS.ETR released its first quarter results today. In the three months ended March 31st, group sales rose 10% to 5 billion 590 million euros on the basis of monetary neutrality, while net profit rose 18.6% to 540 million euros.

Gross profit margin increased from 49.6% in the same period last year to 51.1%.

Compared with the 18.9% growth rate in the first quarter of 2017, sales of Adidas also began to slow down.

Adidas pointed out in the earnings report that double-digit growth in the first quarter profit was driven by the strong driving force of North America and greater China and the electricity supplier, while better pricing and product mix offset the negative impact of exchange rate fluctuations.

The picture shows Adidas's first quarter performance data.

By Region:

Sales in Europe increased 4.4% to 1 billion 603 million euros over the same period last year.

Sales in North America increased by 5.3% to 988 million euros compared with the same period last year.

Sales in the Asia Pacific region rose the highest, up 6.4% to 1 billion 856 million euros compared with the same period last year.

Sales in Russia fell sharply from 35.5% to 119 million euros a year.

Sales in Latin America fell 5.3% to 430 million euros compared with the same period last year.

Emerging market sales fell 16% to 308 million euros compared with the same period last year.

Sales of other businesses fell 3.4% to 197 million euros compared with the same period last year.

The picture shows Adidas's first quarter performance data.

By brand:

The core brand Adidas grew by 3.3% to 5 billion euros over the same period, benefiting from the popularity of the Adidas Original series, running two digit growth in running, football and training products; Reebok fell 10.6% to 440 million euros in the same period, due to a decrease in sales volume due to training and running categories.

The brand recorded an increase of 13% in the same period last year.

Adidas highlighted in the earnings report that the electricity supplier is still the fastest growing channel, with an increase of up to 27%.

In fact, at the annual report meeting a month ago, group CEO Kasper R rsted raised the median operating profit to 11.5% in 2020, and said that the growth momentum of Adidas will come from sustained online sales growth and huge potential in the Chinese market.

To further optimize channel management, Kasper R rsted has announced that it will gradually reduce its stores in the next few years, but he adds that Adidas's website is its most important store.

It is reported that Adidas official website and Reebok brand brand official website has become the largest source of revenue for the group business channel business. The Group expects that the annual sales volume of its own e-commerce platform will reach 4 billion euros in 2020.

As early as 2016 when he joined the group in 2016, Kasper R rsted had increased its annual expenditure by nearly 40%. He said that this year will continue to increase the cost of 900 million euros to enhance the effectiveness of digital operation.

In addition to hiring 200 new employees in the digital business area, the fund will focus on logistics and distribution services.

According to Harm Ohlmeyer, chief financial officer of Adidas, Adidas is expected to deliver services in major cities by increasing delivery speed in the future.

The new mobile terminal app launched by Adidas last year is now on the shelves in the United States, Germany and the United Kingdom, and is expected to expand to France, Spain and Canada this year.

This application uses Salesforce technology to provide customized sports solutions for consumers, and will provide personalized articles, videos and sports tutorials and related products.

China once again proved to be a key market for Adidas, with sales in the first quarter of China increased by 26%.

Compared with the total sales in the three months ended February, Nike's total sales volume was $1 billion 336 million, an increase of 21%.

Meanwhile, Adidas's sales in North America also increased by 21%, continuing to challenge Nike's home advantage.

Nike's sales in North America dropped by 6% to 3 billion 570 million dollars in the last quarter.

The confidence of Adidas's growth also comes from the continuous heat purchase of sports products in the Chinese market. According to the industry foresight of research institutes, China's sportswear in the next few years is expected.

It will maintain a rapid growth rate of over 10%. By 2020, the sportswear market will reach 280 billion 800 million yuan and will exceed 340 billion yuan in 2022.

Kasper R? Rsted said that he believed in the profit prospects of the Chinese market. He emphasized that China's population is four times that of the United States and that there will be a potential growth potential of 16 times in the future.

Last year, sales in the Greater China region hit the highest growth rate in all regions, and revenue rose 25.9% to 3 billion 789 million euros, of which the main brand Adidas and Reebok brand sales increased by 30% and 25% respectively.

Gao Jiali, managing director of Adidas Greater China, said in a media interview that the group's new strategy has entered third years and aims to become the best sports brand in China and even in the world by 2020.

When it comes to the recent trade war between China and the United States, Kasper Rorsted is not worried, because most of the adidas manufacturers in China serve the Chinese market, while most of the manufacturers in the US and Europe are Indonesia and Vietnam.

It is noteworthy that Kasper Rosted admits that 10% of the adidas products currently circulating in the Asian market including China are fake, whether online or offline.

Some analysts believe that Nike's outstanding performance in the past ten years owes much to the lack of substantive competition in the industry.

But now things are changing dramatically.

In its earnings report, Adidas stressed that the forecast for 2018's earnings remained unchanged. Sales of group sales were expected to grow at around 10%, due to sustained double-digit growth in North America and the Asia Pacific region, with a gross margin of 0.3 basis points to 50.7%.

As of press release, Adidas shares fell 1.01% to 205.10 euros per share, but the annual stock rose by 22%, far exceeding the Nike 9.1% level of competitors.