The Outlook For Adidas: Positively, Sustainably Creative

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Adidas lifted its profit outlook in July with shares in the German sportswear company up 8.62% and a sales forecast projecting growth between 17% and 19% in 2017.

In addition t investing in digitalCEO Kasper Rorsted has been doubling down on boosting sales of casual sneaker lines like the Superstar, a best-seller in the U.S., and transforming Adidas into a fashion-savvy business with street cred by making a bigger bet on the global hunger for chic sportswear.

As Rorsted commented on the company’s second quarter earnings call in August,

We continue to see very strong ongoing brand momentum with double-digit growth in all key regions: China 28%, North America 26% and Western Europe 19%. The decision to really aggressively push e-commerce has proven to be right… and we’re seeing accelerating momentum with the income growth of 66%.

Staying positive and optimistic, its sunny mantra — “Here to Create” — encompasses all sports, all levels, all passions: “From the field, to the court, to the pitch, creativity changes everything. Create your own waves. Create positivity.”

As part of its accelerating momentum and transformation, this year Adidas AG sold its TaylorMade golf brand and the CCM hockey brand to focus on its flagship brand (along with rightsizing the Reebok brand) in an initiative it’s called One Adidas. While Superstar and Stan Smith shoe sales have been declining, it is seeing growth in Boost and Adidas Originals.

With Adidas global creative director Paul Gaudio noted at the Cannes Lions International Festival of Creativity in June that open-source innovation was key to the brand’s successes such as the Boost sole as R&D efforts on its Creator Farm network keep the brand, creatively speaking, on its toes.

It's Monday. Find your path, not an excuse. #UltraBOOSTX

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Adidas opened the Speedfactory in Ansbach, Germany at the start of 2017 to manufacture trainers and other sports shoes using robots and new production techniques such as additive manufacturing or 3D printing.

Production plans are to ramp up to 500,000 pairs of trainers a year and a second Speedfactory is planned near Atlanta for the American market. The end-goal—shorten the supply chain.

“The Speedfactory will help it to transform the way trainers are created. The techniques it picks up from the project can then be rolled out to other new factories as well as to existing ones, including in Asia—where demand for sports and casual wear is rising along with consumer wealth.

Another bright spot: a new partnership with Major League Soccer, which is going beyond the league “and deep into the next generation to grassroots…” Rorsted commented. One partnership that’s closely watched: the Yeezy brand with Kanye West, which sat out this New York Fashion Week.

On the sustainability front, Adidas released the SS17 Parley swim collection in partnership with ocean conservation group Parley for the Oceans, a continuing partnership that recycles ocean plastic into yarn for its shoes. Currently 50% of all its swim apparel is made from recycled material and 76% of its pool collection incorporates recycled polyamide. Adidas has vowed to create a minimum of one million pairs of the shoes from ocean plastic by the end of 2017.

The company is also working on the Adidas Futurecraft Biofabric, a biodegradable shoe that can break down in under 36 hours after adding a special enzyme and start selling them early next year. The material that forms the shoe’s upper uses the same proteins that spiders use to spin silk.

Mark King, Adidas’ North American president said, “Until a couple years ago we probably hadn’t done as good of a job as we would have liked on a lot of different fronts.”  “And the first was making North America a real priority for the company.”

Adidas has collaborated with West and Pharrell Williams which led to a celebrity run on its sneakers by Emma Stone, Taylor Swift, Karlie Kloss (still a brand ambassador) and Justin Timberlake. Adidas endorsers include NBA all-star James Harden of the Houston Rockets, NFL star Aaron Rodgers of the Green Bay Packers and baseball’s Kris Bryant.

The brand also increased its social media presence creating a contest for fans to tweet images of themselves for possible use on the label of a popular shoe line. As Matt Powell, analyst with NPD Group, told the Baltimore Sun, “They’ve really changed their approach to the U.S. market.”

In 2018, Fitbit will be offering an Adidas-branded special edition of the Ionic smartwatch that will “leverage Adidas’ robust performance program expertise.” Adidas Football launched a new collection in collaboration with clothing designer Gosha Rubchinskiy, a mix of track suits, scarves and sneakers, leading up to the 2018 FIFA World Cup in Russia which takes place June 14-15 next year.

Looking ahead, Rorsted said he plans to “over-invest” in the U.S. and quadruple e-commerce online sales to €4bn by 2020.

“We see strong growth momentum to continue in the second half and we will drive a lot of investment into our brand to make sure that we sustain the brand heat, but also make sure that we have enough support to support the sell-through of our new products and product launches in the second half,” Rorsted told analysts in August.

“We believe we will start to capitalize in the World Cup 2018 by the end of the year and thereby continue the growth that we’re seeing in the first half and leverage our top line growth to drive operating overhead efficiency.”

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