From famous athletes to school kids, adidas wants to help everyone get in the game. The company sells sports shoes, apparel, and equipment sporting its iconic three-stripe logo in 170 countries. The #2 sporting goods manufacturer (behind NIKE) focuses on football, soccer, basketball, running, and training gear and apparel as well as lifestyle goods including SLVR and Y-3 fashion brands. adidas' wholesale division gets adidas and Reebok products to retailers while the retail group runs its own 2,445 Reebok and adidas shops. Other businesses include TaylorMade-adidas Golf, Rockport, and Reebok-CCM Hockey. Founder Adi Dassler, brother of PUMA creator Rudi, began making shoes in the early 1920s.
Germany's adidas rings up half of its sales in Europe. Greater China and North America contribute 16% and 13% of sales, respectively. It also sells and distributes its shoes and apparel in Latin America and other markets in Asia. Key growth markets for the company include North America, China, Russia, Latin America, Japan, and the UK.
Adidas brand shoes are the company's cash cow, accounting for three-quarters of total sales. The Reebok brand and TaylorMade-adidas Golf each represent about 10%. While the company operates its own retail stores and sells shoes online, wholesaling is the bigger business, representing nearly two-thirds of total sales. The company supplies adidas and Reebok brand shoes to retailers.
Adidas delivered strong sales growth in 2012, despite macroeconomic challenges in many regions, but especially in Europe, its largest market. Sales increased 14% in 2012 versus 2011 to nearly $19.7 billion. However, net income was down 20% over the same period. With the exception of the Reebok brand, whose sales fell 14% in 2012 versus 2011, adidas's other brands all posted healthy sales gains. Indeed, the core adidas brand posted a 15% uptick in annual sales, while TaylorMade-adidas Golf's sales rose 29%.
The company's Retail business segment posted a 21% gain in annual sales, while the wholesale unit posted a 7% gain. The hottest growth markets for the German firm were Greater China and European Emerging Markets, each with sales up 15%. Latin America and other Asian markets, reported 8% and 7% gains, respectively. Overall sales in North America rose a modest 2%. 2012 marked the third consecutive year of rising sales for the company, following a decline during the global financial crisis.
In 2010 adidas unveiled its strategic business plan -- called "Route 2015" -- outlining its strategies and objectives for the next five years. The plan set ambitious total group sales growth targets of 45% to 50% (on a currency-neutral basis). Aiming to grow its bottom line faster than its top line, adidas hopes to grow annual earnings at a compound annual growth rate of 15% and reach an operating margin of 11% sustainably by 2015. (In 2012 its operating margin was 8%.) Three markets singled out for their growth potential are North America, Greater China, and Russia, which are expected to contribute about 50% of the total group growth under the Route 2015 plan. In the US, the company believes its brands have enormous opportunity to gain market share by focusing on improved distribution and launching more innovative products.
To fulfill its goal of growth in China, adidas says it will add 2,500 stores there by 2015, putting upscale outlets in the large cities and teen-targeted, casual NEO shops in smaller markets. Other moves include expanding e-commerce, through a venture with China's biggest online retailer, Taobao.com; sponsoring running competitions; and partnering with workout center chains.
Going forward, one of the company's strategies for success is to continue offering products with both mass and niche appeal, allowing each of its brands to maintain a unique identity. Part of the innovation is a fashion and sport line of apparel from a deal with Giorgio Armani, to go with adidas' SLVR and Y-3 lines. Another example is the mi line that combines technology and gear in customizable shoes, digital coaches, online support, heart rate sensing apparel, and mobile hardwear to connect it all.
Mergers and Acquisitions
In November 2011 the company acquired Five Ten, a leading brand in the technical outdoor markets and outdoor action sports community, for $25 million. As part of its Route 2015 strategy, adidas expects sales in the outdoor segment to exceed €500 million ($662.7 million) by 2015.