After an optimistic year of sales data in 2015, German sportswear maker Adidas plans to expand its outlet in China by a third over the next five years. They are going to add 3,000 new stores by 2020 for a total of 12,000 stores in the country over 2,200 cities. Adidas is counting on rising affluence and health-awareness in China despite a slowdown in the Chinese economy. This is an excellent time for Adidas to capitalize on its fastest growing global market, since the Chinese government is issuing new policies to support the soccer industry.
The primary focus for Adidas in this strategy is soccer. Adidas is working to be the major provider of soccer equipment to young athletes as the government is mandating that soccer be obligatory in schools. President Xi Janping of China is a huge soccer fan, and his dream is for China to become a powerhouse in the sport and host a future World Cup. China is shifting towards developing a soccer-friendly environment, as plans are in place for new facilities, television networks and events for the sports-crazed middle class.
Some analysts worry that the recent success of Adidas has more to do with the sportswear industry expansion rather than the company itself. With the Summer Olympic Games and UEFA European soccer championships being held this year, this is a growing demand for Adidas products. The main concern is whether or not Adidas will be able to retain high demand at the conclusion of these events.
Investors are confident in an Adidas comeback as their new CEO Kasper Rorsted takes control of the company in October with his competitive “American mentality.” Adidas’ stock price jumped 6% back in January when they made the announcement of a new Chief Executive. The sportswear giant reported its best earnings in years after a rough ride for sales and profits in 2013 and 2014. The company posted a net profit of $689 million in 2015, up 29% from the previous year. Sales data for Adidas reported a rise of 16% for the year. With the expansion of Adidas in China, in addition to a push for the sports industry in the country, Adidas has put themselves in a position to outcompete its rival Nike in the long term.
By Daniel Daley