Adidas AG’s chief executive said he expects 2016 to be a “record year,” in which the Adidas brand’s sales in North America would increase by a double-digit percentage.
Herbert Hainer, who last year faced calls to step down, is the longest-serving CEO of a German blue-chip company. He is staying the course and in the run-up to his final year at Adidas’s head office, he has been striving to turn around the company’s poor performance before his departure in March 2017. He was more confident than ever about his revival campaign when he met the media at the company’s headquarters in Bavaria on Tuesday.
“We have changed a lot,” he said. “I am happy and proud […] I do not in any way worry about the future.”
A year ago, his sentiment was less buoyant. Adidas had just slashed its profit forecasts because of dwindling sales at its golf business and currency losses in Russia. It also struggled in the U.S. sporting-goods market, the world’s biggest and most influential market for sports gear, in which Baltimore-based competitor Under Armour Inc. snatched its No. 2 position.
At the time, Mr. Hainer was under pressure from activists, some of whom even demanded his premature departure. He, on the other hand, refused to budge. He promised he had learned from his mistakes.
Since then, several management changes, an increased marketing push, and a more Americanized focus at the company’s U.S. business have helped the Adidas share price rise roughly 55% on the year, making Adidas one of the best performing companies at the Frankfurt stock exchange. In early November, the company raised its outlook for 2015 and posted a 10% profit rise in the third quarter.
“I am telling you–we are winning big time,” Mr. Hainer said in November.
Tuesday, he said that all of Adidas’s investors now are “satisfied.” Mr. Hainer particularly emphasized the company’s turnaround in North America.
Besides adding several new American athletes and college leagues to its sponsorship portfolio, Adidas invested 50% more in marketing in the U.S. in the first nine months of 2015 compared with the year before, he said.
As a result, Mr. Hainer said, the company’s order books were now full for the first two quarters of 2016–fuller than they had been in 15 years–and that he expected the Adidas brand to grow by a double-digit percentage in the region.
“I am really optimistic,” he said.
Zuzanna Pusz, an analyst at Berenberg, said the company’s increased marketing efforts are “clearly” helping it gain traction in the U.S. It created buzz around the brand, she said, adding that a general category momentum helped as well.
Adidas however still faces strong competition in the North American market and is far from a full recovery. Its two biggest competitors in the market, Nike Inc. and Under Armour Inc. have both reported strong sales and earnings growth in recent months.
Next year, Adidas has plans to open a 40,000 square feet flagship store on Fifth Avenue in New York City and launch 600 shop-in-shops at Dick’s sporting goods. It is also working to expand its a-standards, the most prominent shelf space, at Footlocker.
“The initiatives all make sense,” said Andreas Inderst, a Macquarie analyst, on Adidas’s recent moves in the U.S. “Clearly, on paper, North America is the land of opportunities and it can’t get much worse from here.”
Mr. Hainer said he expected both the company’s urban lifestyle brands, Originals and NEO, and its performance segment to contribute to growth in 2016. Growth at its performance business would be “particularly strong,” he said, largely due to the introduction of new price ranges.
on the other hand, The investment vehicle of Egyptian billionaire Nassef Sawiris disclosed Friday that it obtained 6 percent of the voting rights in German sportswear brand Adidas, reigniting speculation the German sports brand has become the target of activist investors.
He holds a direct 1.7% stake and controls another 4.3% via stock options, according to a release from the Stuttgart stock exchanged Friday.
source: Market Watch
