(C) Reuters. FILE PHOTO: The spread of the coronavirus disease (COVID-19) in Germany
By Emma Thomasson
BERLIN (Reuters) – German sportswear company Adidas (OTC:ADDYY) aims to double its e-commerce sales by 2025 and make its products more sustainable as part of a five-year strategic plan to lift profitability closer to that of rival Nike (NYSE:NKE).
Adidas is targeting online sales of up to 9 billion euros ($10.7 billion) a year by 2025 with an operating profit margin of 12-14%, up from the 11.3% achieved in 2019 before the coronavirus crisis knocked sales and profitability.
The company has reopened 95% of its stores after coronavirus lockdowns, it said earlier on Wednesday as it forecast a 2021 sales growth rate in the mid-to-high teens, rising to as much as 30% in greater China, the rest of Asia and Latin America.
Adidas shares made early gains on better than expected fourth-quarter results but strengthened further after the strategic plan was published to trade 6% up by 1108 GMT, making them the biggest climber on the German blue-chip index.
While the sporting goods industry has suffered from store closures during the COVID-19 pandemic, it has managed to compensate by selling more online as growing numbers have taken up running and yoga during lockdowns.
Nike, the world’s biggest sportswear brand, has said people have logged on to its workout and store apps en masse, driving significantly higher online sales over the past year.
Adidas will invest more than 1 billion euros in the company’s digital transformation and aims to make nine out of 10 products more sustainable by 2025, using more recycled and biodegradable materials.
CEO Kasper Rorsted said e-commerce will account for more than 40% of the industry’s sales by 2025, with online growing three times faster than offline, adding that more than 70% of consumers say sustainability is an important consideration when making a purchase.
Fourth-quarter sales rose by a currency-neutral 1% to 5.55 billion euros ($6.59 billion) while operating profit slipped slightly to 225 million euros, beating analyst forecasts.
About half of its stores were closed in Europe in the period, but online sales grew 43%.
Rival Puma last month said it expects the financial impact from lockdowns to last well into the second quarter but that pandemic-driven growth in running should support a strong improvement after that.
As part of the new strategy, Adidas will manage greater China as a separate market from the rest of Asia and it has integrated Europe, Russia and emerging markets into a new Europe, Middle East and Africa (EMEA) region.
Net income from continuing operations is projected to rise to between 1.25 billion and 1.45 billion euros in 2021, up from 429 million euros in 2020 but still below the 1.9 billion euros in 2019.
Adidas expects a hit of about 250 million euros to operating profit from costs to make its struggling Reebok brand a standalone company, with a third of that in 2022 but none in 2023, before a planned sale or spin-off of the business.
($1 = 0.8408 euros)
Adidas pushes online sales and sustainability in five-year plan
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