- Prachi Singh |
Adidas has introduced a new strategy ‘Own the Game’ to strengthen the credibility of the Adidas brand, to create a unique consumer experience and to continue to expand the company’s activities in the area of sustainability. The new strategy is designed to significantly increase sales and profitability as well as gain market share until 2025. The company said in a statement that more than 95 percent of sales growth is expected to come from the five strategic categories: football, running, training, outdoor, and lifestyle.
“‘Own the Game’ is a growth and investment strategy, which will lead Adidas into a successful future. Our strategic focus is on increasing credibility of the adidas brand, elevating the experience for our consumers and pushing the boundaries in sustainability,” said Adidas CEO Kasper Rorsted.
Adidas expects DTC business to generate over 80 percent of top-line growth
The company’s direct-to-consumer (DTC) business is projected to account for around half of the company’s total net sales by 2025 and to generate more than 80 percent of the targeted top-line growth. The company’s e-commerce business is forecast to double to between 8 billion euros and 9 billion euros.
From a market perspective, the company will focus on Greater China, EMEA (Europe, Middle East, and Africa) and North America. Overall, these three strategic markets are expected to account for around 90 percent of sales growth until 2025. In addition, nine out of ten Adidas articles will be made from sustainable materials by 2025.
With its new strategy, the company aims to increase sales by an average of between 8 percent and 10 percent per annum on a currency-neutral basis over the four-year period between 2021 and 2025. Gross margin is forecast to expand to a level of between 53 percent and 55 percent, and the operating margin to a level of between 12 percent and 14 percent by 2025. Net income from continuing operations is also projected to increase substantially by an average of between 16 percent and 18 percent per year over the four-year period between 2021 and 2025.
Driven by the significant top-line growth and strong bottom-line expansion, Adidas expects to generate substantial cumulative free cash flow until 2025. The majority of this – between 8 billion euros and 9 billion euros – will be distributed to shareholders through regular dividend pay-outs in a range of between 30 percent and 50 percent of net income from continuing operations, complemented with share buybacks.
For 2021, the company expects currency-neutral net sales to increase at a mid- to high-teens rate. Gross margin is forecast to increase to a level of around 52 percent in 2021 and the operating margin is projected to rebound to a level of between 9 percent and 10 percent. Net income from continuing operations is anticipated to increase to a level of between 1.25 billion euros and 1.45 billion euros this year.
image: Adidas media resources