Adidas to open fewer stores and focus on e-commerce
Calling its website "the most important store we have in the world," Adidas CEO Kasper Rorsted told the Financial Times on Sunday that the company will reduce its store count globally this year. The company plans to close "roughly 170 stores again" this year, CFO Harm Ohlmeyer told analysts last month, according to a transcript from Seeking Alpha.
The company closed a net 220 stores last year (180 in Russia alone), executives told analysts last month, with 37 stores shuttering in North America. The brand aims to focus new stores in perhaps 10 to 15 key cities around the world, Ohlmeyer also said and will invest in IT — both e-commerce and its distribution infrastructure.
Adidas is hiring roughly 200 employees in that space, Rorsted told the Financial Times. Last month, he told analysts that e-commerce grew 57% last year and that the company aims to get "the absolute number to above €1.5 billion still with a target of approximately €4 billion in 2022," according to Seeking Alpha’s transcript.
Closing stores has hit Adidas’s bottom line, but Rorsted last month called for patience, saying the company’s plans will yield solid results over the long term.
"[W]e’re only seeing the very early fruit of this, this is something that we expect will deliver significant advantage over the next years to come," he said. "Digital is making a true impact on our company not only when it comes to how we serve products, but how we engage ... consumers. And also, the early signs of how we design our products. This will be a large investment area moving forward, but one that does and will give us sustainable competitive advantage."
The brand is also getting a boost thanks to product differentiation based in part on streetwear styles. For the year, currency-neutral revenues rose 16%, reflecting an 18% increase at Adidas, which had double-digit sales increases in the running category as well as at Adidas Originals and Adidas Neo, plus high-single-digit sales increases in training. Reebok revenue rose 4%, driven by double-digit sales increases in Classics and low-single-digit growth in running. While the brand's international revenues grew at a double-digit rate last year, U.S. sales declined due to many store closures. E-commerce revenue last year rose 57%.
Unlike many retailers, Adidas is also seeing healthier margins in its digital sales than at stores. While the company is shrinking its footprint overall, it will open or remodel stores in key cities to amplify the customer experience, Ohlmeyer said.
- Financial Times Adidas looks to score online as it drives harder into digital
- Seeking Alpha Earnings Call Transcript adidas's (ADDYY) CEO Kasper Rorsted on Q4 2017 Results
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