A 19% rise in revenue for Adidas in its second quarter earnings results was fueled by particularly strong support from e-commerce, where online sales income grew 66%. The company is muscling in nicely on Nike and Under Armour.
In March this year, Adidas said it was planning to quadruple its online sales to $5.6 billion by 2020, saying it will move its focus to fast fashion as the lifestyle category outperforms traditional sportswear, and boost its social efforts as well.
Last week’s Q2 earning results that Adidas posted evidences it is making good on its goals.
The global sportswear retailer posted total sales growth of 20%, according to its Q2 statement release, and a big factor in that strong growth was e-commerce, which the retailer has been aggressively pushing.
“The decision to really aggressively push e-commerce have proven to be right based on the work that Harm (Harm Ohlmeyer, the company’s CFO) has done in the last five to six years and we’re seeing accelerating momentum with the income growth of 66%,” said Adidas CEO,Kasper Rorsted, in an analyst address last week.
Earlier this year, Rorsted also said the company will raise its game when it comes to competitor Nike Inc., a battle in the sporting market which he declared was officially global. “Adidas now seeks 11% operating profit by 2020,” Rorsted told Bloomberg. “We had a fantastic 2016 – we delivered $1 billion (US) profit and our plan is to deliver $2 billion profit in 2020.”
Looks like Adidas is making good on this too, according to its Q2 results. Retail analyst, John Kernan from Cowen & Co. noted that Adidas is “outgrowing Nike meaningfully in all major geographical regions and placing greater pressure on (Under Armour),” saying that the company’s 66% e-commerce growth “continues to highlight the massive opportunity in (direct-to-consumer sales).”
Nike has already taken that on board, evident in its controversial move to sell directly to consumers via Amazon, in addition to selling directly via its own stores and its e-commerce platform.
One of Adidas’ key ingredient over Nike has been growth in its “street style” collections and the continuous release of new colours and key products like its NMD (which stand for “nomad”) sneaker range – footwear which pays homage to old design concepts with new technology inbuilt – NMD continues to merge the best of Adidas innovation with progressive, street-ready design.
“We’re quite comfortable and confident that we can get to where we want to get, but it’s not just one battle against one competitor,” said Rorsted. Adidas also competes with sportswear label Under Armour who are relatively new in the Australian market, but a dominant player in the US sportswear scene. Adidas continues to kick goals – the company knocked Under Armour off their number two spot last year.
Under Armour executives recently told analysts the retailer is planning to shed about two percent of its workforce as part of a restructuring plan that followed a second quarter loss to shareholders.
Nike says it is following through with its strategy focusing on “speed and deeper connections with consumers.” This is part of its “Consumer Direct Offense,” which aims to enhance innovation and boost product development in order to deepen its connection to consumers in the world’s major cities.