The Adidas Group is projecting another year of double-digit sales expansion in Greater China as it invests to build up a network of 12,000 Adidas stores by 2020, the company said during a trip to China by Kasper Rorsted, its chief executive since October.
The brand currently has more than 10,000 stores in more than 1,200 cities, and the enlarged network will enable it to move into smaller cities. Colin Currie, the Adidas Group's managing director in Greater China, was quoted as saying in the China Daily that the group makes about 50 percent of its regional sales in 23 Chinese cities, but he expects about half of the growth in the years ahead to come from smaller cities.
Rorsted said that the group's sales in its second-largest regional market should expand at a double-digit rate but that it would be slower than in 2016 – in constant currencies, for the Adidas and Reebok brands. The Adidas Group reported a sales increase of 21.9 percent to the equivalent of €3,010 million in China last year, with a rise of 27.5 percent in constant currencies.
As reported by Reuters, Rorsted further predicted that the group's operating margin in the country should stabilize and decline over time. The operating profit margin of 35.2 percent reported in Greater China last year compares with operating margins of 18.0 percent for Western Europe and just 6.3 percent for North America. However, Rorsted said that it should increase markedly in North America in the short term, while its development would slow down in China.
On an earlier visit by Matt O'Toole, who is in charge of the Reebok brand, the Adidas Group indicated that it intended to have 500 stores for Reebok in China by 2020, up from the current level of about 100 stores and with 50 openings this year. The brand is focusing on the fast-growing fitness category as well as running, which has been surging in China in recent years.
On his own Chinese trip earlier this month, Rorsted further dispelled the notion that the group's production could be relocating to Europe or the U.S. on any large scale. He described such moves as financially illogical and highly unlikely, explaining that the existing plants were huge and highly automated.
The Adidas Group's own investments in automation have led to a partnership with Siemens, announced earlier this week. The tie-up is meant to improve the production of custom-made sportswear and to accelerate the process from design to finished products. Siemens explained in a statement that it would simulate the Adidas Speedfactory, creating a “digital twin” to conduct tests and provide improved production quality and efficiency. More in the News Briefs.
The Adidas Group is reporting its results for the first quarter next week.
