Adidas Sees 2011 Growth on China Rebound, Russian Demand
Adidas AG, the world’s second- largest sporting-goods maker, will increase sales and profit in 2011 as China rebounds and Russia becomes the company’s top European market, Chief Executive Officer Herbert Hainer said.
Sales of new products such as Reebok ZigTech trainers will also help boost sales next year, Hainer said in an interview yesterday at Adidas’s headquarters in Herzogenaurach, Germany. That will help compensate for the lack of a sporting event the size of this year’s World Cup.
“You will see that in 2011 we will grow again,” said Hainer, 56, referring to both revenue and earnings. “I don’t see anything, honestly, that should hinder us from growing in 2011 and the years ahead.”
The sporting-goods maker, known for its three-striped logo, has said sales this year will exceed 11 billion euros ($14.4 billion), driven by record soccer sales after this year’s World Cup. Adidas sold more than twice as many jerseys as at the last tournament four years ago, including 200,000 Spanish jerseys in the weeks after the team became world champion.
The company’s biggest challenge next year will be to secure sufficient manufacturing capacity to accommodate growth, Hainer said. He’s increasing production sites in Laos, Vietnam and Cambodia, adding to those in China, where wages at privately owned companies will rise by as much as 17 percent annually in the next three years, according to Deutsche Bank AG estimates.
Adidas fell 4 cents to 43.56 euros in Frankfurt trading today. The shares have added about 15 percent this year.
Acquisitions are unlikely to play much of a role in Adidas’s strategy, the CEO said, though he didn’t rule out the possibility of making one. Adidas could buy a company with sales of a few hundred million euros, he said.
Hainer, whose company aims to expand in performance sports gear, has no interest in buying Germany’s Jack Wolfskin. The clothing company’s owners may put it up for sale, four people familiar with the plan said last month.
Sales in China returned to growth this quarter after declining 10 percent last year and 16 percent in the first half, Hainer said. The company has been able to raise prices in the world’s most populous country after discount sales of inventory dating back to the Beijing Olympics in 2008 ended.
That growth “will continue in the fourth quarter and 2011,” Hainer said. “My confidence is very high.”
Adidas has introduced new products and is working more closely with franchise partners in China to speed the turnaround, Hainer said. The German company has regained the No. 2 position behind Nike Inc. in China’s online sporting-goods market, after falling behind Li Ning Co. late last year, he said.
Russia, the fastest-growing European market for Adidas, will post growth of at least 10 percent this year and next in local currency, the CEO said. Russia, where Hainer says Adidas has 65 percent to 70 percent market share among international brands, is overtaking markets including the U.K., France and Germany as an increase in the value of the ruble this year supports sales in euro terms.
Adidas will introduce a new sporting shoe technology in the second half of 2011 as it seeks to further its expansion in running equipment, Hainer said. The product has been shown to retailers and has received “extremely good feedback,” he said, declining to provide further details.
The company will capitalize on a trend for ultralight shoes and apparel, Hainer said. Adidas introduced an F50 shoe in June that weighs about 160 grams and is the lightest soccer boot on the market, according to the company. Adidas intends to sell more than four million pairs this year at about 200 euros each.
EasyTone trainers have helped Hainer revive revenue at Reebok, which the company bought in 2006. EasyTone shoe sales are forecast to rise to 10 million pairs this year from 300,000 last year, he said. The shoes retail for about $100.
ZigTech shoes, geared toward runners, are aimed at easing strain on leg muscles. The company wants to play a bigger role in running, a market bigger than soccer, according to Hainer, and will benefit as people become more active.
“People are now more willing to spend more and more money on functional clothes,” he said.
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