2018, An Increase Of 8% Over The Year, Adidas Will Pay More Attention To The Business Of E-Commerce.

Beijing time March 13th, the German sports brand Adidas announced its annual performance.

In the 2018 fiscal year, excluding the exchange rate factor, Adidas group's overall revenue grew by 8% to 21 billion 900 million euros compared with the previous year. The three strategic domains of North America, Greater China and electricity providers once again achieved two digit growth, and its brand Reebok also rerealized profitability.

Specifically, Adidas and Reebok have maintained strong growth in North America and the Asia Pacific region, with a growth rate of 15%, of which the Greater China region grew by 23%, and the world cup's sales promotion offset the negative impact of the closure of a large number of stores.

In addition, revenue in Latin America grew by 6%, sales in Russia / CIS increased by 1%, and in Europe, the same as last year, and income in emerging markets declined by 3%.

In 2018, Adidas's profitability increased further, and its operating profit margin increased by 1.1 percentage points to 10.8%. The net income from continuing operation increased by 20% to 1 billion 709 million euros, all of which reached a record high. Gross profit margin also increased 1.4 percentage points to 51.8%.

"Record sales, historical profit margins, strong net profit growth - 2018 is another successful year for the company," Adidas CEO Kasper Rothd (Kasper Rorsted) commented on their performance in 2018.

But after the earnings announcement, Adidas's shares fell more than 5% to 197.7 euros in early trading on Wednesday.

The fear of the capital market may come from Adidas's prediction that its 2019 may be a little bumpy.

Excluding exchange rate factors, they expect business revenue to grow by 5% to 8%, that is to say, it is likely to be lower than 8% in 2018, and in 2017, this figure is 15%. We can see that the growth rate has dropped by nearly half.

In contrast, Nike's latest 2019 fiscal year second quarter earnings reported a 10% year-on-year increase in sales, while Puma's 2019 sales growth forecast was 10%.

One explanation of Adidas's explanation is that supply chain problems will affect its sales performance in North America in the first half of this year.

Kasper Rothd told CNBC that "Adidas's business in North America has doubled in the past three years, but we can not meet such a huge demand, so we may miss the whole year growth of 1%-2% this year".

This is a happy worry. The biggest consumer demand is the middle priced clothes. Kasper Rothd said he did not intend to solve the problem by raising the price.

At present, Adidas's clothing supply mainly comes from Kampuchea, China and Vietnam.

They denied that the problem was related to the tension between China and the US.

Compared with the shortage of supply chain, the explosion effect and Star Marketing stagnation period may be a more important reason for Adidas's revenue growth slowing down.

Kasper Rothd said frankly, Stan Smith and Superstar and other sports shoes style is no longer hot.

According to NPD Group, Superstar is the best seller in the US in 2016, but now the aura has faded.

From 2017 to 2018, sales of these shoes dropped by 565 million dollars.

Adidas is also aware that the explosive money will disappear one day. Relying solely on the explosive effect and star marketing can not support the sustainable development of the brand. In recent speeches, Kasper Rothd emphasized the importance of the electricity supplier.

In terms of earnings, Adidas's revenue growth has also been mainly driven by double-digit growth in DTC business, especially in the electricity business.

In 2018, Adidas's electricity revenue increased by 36%, more than 2 billion euros.

According to the plan, Adidas's goal is to achieve 4 billion euros of online sales by 2020 - about 12% of the total business - but Kasper Rothd said that in the long run, the company expects this figure to rise to 25%.

Last September, Adidas launched its largest YEEZY BOOST 350 V2 offering, mainly through official channels such as the official website.

Adidas described it as "the largest ever digital issue", from hunger marketing to increased volume.

After entering the market for 3 years, Adidas began to let YEEZY go to the stage of scale income.

Adidas said in its earnings report that Yeezy Boost 350 V2's media mention rate and search volume exceeded any previous Yeezy version, bringing millions of visitors to the official website and promoting the growth of e-commerce business.

In addition, Adidas launched official applications last year, and downloaded more than 7 million times in 25 countries.

Kasper Rothd believes that the electricity supplier is still in the early stage of development, and there will be tremendous growth opportunities.

But he also pointed out that electricity providers must be combined with offline stores and flagship stores to enable consumers to actually see products.

From the layout of Adidas in China, we can see the obvious embodiment of this train of thought.

Last November, NJE800, Adidas's largest brand center in Asia Pacific, opened in Shanghai.

According to data provided by James Grigsby, senior director of Adidas retail development strategy, at that time, Adidas had more than 11000 stores in China and opened about 1000 new stores every year, that is, 2-3 new stores were opened on average every day.

James Grigsby said Adidas has established 23 key cities in China. Their goal is to open at least one small brand center, and they are also trying to open more stores in three or four cities.

In addition to opening more stores, Adidas also wants to make the store bigger, and the average size of the store may be about 200-250 square meters from the previous 100 square meters, so as to meet consumers' more experience needs.

Obviously, this is also for more interaction with online business.

In February 19th, Adidas announced that the latest ULTRA BOOST product UB19 will start in Tmall, which marks the formal conclusion of Adidas and Tmall comprehensive cooperation in 2019.

Ali will boost Adidas's new retail digital upgrade, giving priority to the cooperation of all channels, intelligent stores and store digital scenes.

Ali will also carry out big data empowerment for Adidas, and conduct multi-faceted cooperation through data banks, new product innovation centers and other projects.

ULTRA BOOST is Adidas's most important running shoe series.

In the past, the release of heavy shoes will normally be passed through Adidas's own channels, but in September last year, Adidas launched a limited Yeezy shoe in Tmall. According to the report, the sales volume reached more than 70 thousand pairs in 12 hours, creating a single day sales record of sharp goods, and this product was finally selected for Tmall's annual whole network popularity.

In 2018, double eleven, Adidas's Tmall pcript was pretty bright, and the turnover of more than 1 billion yuan was 40% higher than that of the same period last year.

Perhaps they are satisfied with the results of the cooperation. The two sides announced this time that they will carry out in-depth cooperation at various levels.

Through the Alibaba business operation system, Adidas will carry out the new retail digital upgrade, using all the channels, smart stores, shopping guide and store digitalization and other new retail scenarios, to open up online and offline inventory and enhance retail efficiency.

In the future, consumers can get preferential rights on Tmall and then go to the direct stores under ADI line. Consumers can enjoy online shopping guide service, online order and then pick up goods or experience under the line.

According to the billion euro network, Adidas has plans to operate Tmall as the "first official website" on the Internet, open more category flagship stores, and put more new products in Tmall's debut, which will become the strategic focus of the group's new global product launches.

In the future, Adidas's three new product lines of running shoes, basketball shoes and football shoes will start in Tmall.

This is not a conventional decision.

Generally speaking, the profits from sales through third party channels are lower than those sold directly to consumers. The control over brand promotion and pricing will also weaken, and the acquisition of consumer data will also become indirect.

Just last year, in an interview with Business Insider, Kasper Rothd also said that because Amazon is not a traditional sports retailer, the latter pays more attention to efficiency and price, which may damage Adidas's ability to sell at full price.

"Our e-commerce strategy is to establish contact with consumers directly, which is the most important part," he said, the Adidas website is the most important brand online store.

The reason why Adidas chooses to cooperate with Tmall in depth is probably because the Tmall provides more value-added services than Amazon.

Whether it is content operation or new retail pformation combined with offline, this may be Adidas's main desire to cooperate with Tmall.

In addition, in terms of efficiency and price, it is not known whether Adidas will face the Chinese market at a higher discount rate in the future.

After the release of the earnings report, Adidas Asia Pacific managing director Gao Jiali (Colin Currie) said, "2019 we will focus on digitalization and other fields, further enhance the brand commercial value, and at the same time, take the consumer as the center, by providing consumers with exciting products, inspirational brand activities and high-quality retail experience, to better meet the needs of consumers, and win consumers' love for brands."

In addition, for Adidas, the good news is that Reebok has returned to profitability.

Although from the point of view of revenue, the performance of Euro 1 billion 687 million still dropped by 3%, but Reebok's profit grew by more than 150 million euros in two years. Gross profit margin increased by 3 percentage points to 43.7% in 2018. The growth mainly came from the classic series of double-digit growth, and the series of sports performance declined.

"We are glad that Reebok has made a profit in 2018 - the original goal is to make profits in 2020," Kasper Rost said.

As a brand with historical heritage, Reebok has the potential to take the baton of the retro shoe boom. The cooperation with Vetements is a typical example.

By the end of 2018, Adidas also had a net cash of 959 million euros, almost two times that of the same period last year, which means that they also have enough firepower to invest.