Adidas is targeting a 15% increase in net income per year to 2020

Adidas is targeting a 15% increase in net income per year to 2020

Adidas Group has said speed to market will be a key competitive advantage for the German sporting goods giant over the next five years, as it looks to accelerate profit and sales growth. With this, the company is piloting automated production units closer to its core consumers to reduce lead times.

Speaking at its investor day in Herzogenaurach, Germany, yesterday (26 March) the company said it has already set the benchmark when it comes to speed to market, by reducing production lead times and increasing in-season creation with its NEO lifestyle label for teenagers.

Adidas said it has the "fastest footwear creation to shelf" within the industry, with new products in the category in store within 45 days of design, compared to the sector standard of 12-18 months. Some 50% of the group's footwear business is built on lead times of 45 days.

Automated production units
But to turn Adidas into the industry's first "fast sports company", it is now testing automated production units. These could be placed in Europe, allowing it to produce closer to its consumers, and thereby reducing leading times further.

"This will allow simplified manufacturing of apparel and footwear and product innovation through new manufacturing technology," said Claire Midwood, general manager of NEO and style at Adidas.

"This is the start of our journey," she added. "Our 2020 vision is to have fully automated and scalable manufacturing with independent cells wherever we want and wherever the consumer desires it."

While the company gave no concrete timelines and said the project is in its early stages, a spokesperson for Adidas told just-style separately: "Obviously this won't change all of our sourcing overnight.

"However, in order to bring speed to everything we do, we'll strive to make manufacturing cells available to consumers closer to where they shop."

To complement this, the company said it will further increase sales through controlled space activities to over 60% of sales. It also aims to expand its e-commerce business to above EUR2bn (US$2.18bn) in five years by implementing a "true omni-channel approach".

Adidas added that it will "evolve production capabilities" to dramatically expand product customisation options for its consumers.

"We are living in a fast-changing world," CEO Herbert Hainer said. "Only what is new is relevant to the consumer. Therefore, we have to relentlessly focus on ‘creating the new’ for our consumers. And we have to constantly re-invent ourselves as an organisation to lead the change in our industry.

"Going forward, speed will be a key competitive advantage for us as we transform the Adidas Group into the first true fast sports company."

Accelerated growth
The comments come as Adidas said it expects net income to increase around 15% annually, and currency-neutral revenues to grow at a high-single-digit rate on average per year until 2020. By 'creating the new', the company aims to accelerate growth by significantly increasing brand desirability.

To help achieve this, the company is also looking to expand its presence in six key cities and invest in its core brands. With 80% of global gross domestic product (GDP) generated in cities and global trends being increasingly shaped in metropolitan areas, Adidas aims to continue its growth in all relevant global markets, focusing on six key cities: Los Angeles, New York, London, Paris, Shanghai and Tokyo.

"Global brands are created in global cities," said Roland Auschel, executive board member responsible for global sales. "If we win running in New York and Los Angeles, we will win running in the US. Therefore, we are committed to win market and mind share in key cities around the globe."

Its commitment to the US, particularly North America, was revealed earlier this month. Describing it as a "key priority" for 2015, Adidas said that despite the market's disappointing performance last year, significant changes at its organisation in the region would help it develop the right product for the market.

In order to capture growth opportunities even more effectively, the company will also focus investments across its core brands: Adidas, Reebok and TaylorMade.

To further strengthen its ties with consumers, Adidas will get them involved in how it creates, designs and presents products to effectively be "part of its brands". Already working with Stella McCartney, Kanye West, BASF and Google, the company's executive board member responsible for global brands, Eric Liedtke, said: "We will open up so that they (consumers) can co-create the future together with us."

An end to recent troubles?
Last year was certainly a mixed year for Adidas. Stripping out the impairment losses associated with the divestiture of its Rockport business, the group’s net profit declined 27%, hurt by weakness in the global golf market, depressed consumer sentiment in Russia and currency headwinds.

Delving deeper into the company's mixed performance in 2014, Adidas faced increasing pressure from investors to consider replacing Hainer in September, after cutting its full-year outlook and losing further ground to rival Nike.

But two months later, Adidas said it had been "aggressively" addressing restructuring at its golf unit, adjusting its business in Russia and intensifying efforts to revive growth in the US.

And in February this year, Adidas revealed its search for a successor to Hainer would be a long-term process, after the chief executive confirmed details of the process in a letter to employees.

Yesterday, he concluded: "Our new strategy is built on speed, focus and openness. As a result, we will accelerate our growth story and deliver superior returns to our shareholders."

Click on the following link to view just-style's interview with Frank Henke, the group's global director of social and environmental affairs: INTERVIEW: Frank Henke discusses Adidas sustainability agenda.