Innovative marketing, emerging franchises and limited releases of new product have enhanced perception of the Adidas brand

Innovative marketing, emerging franchises and limited releases of new product have enhanced perception of the Adidas brand

Sportswear giant Adidas eventually expects to have half of its products produced in 45 days or less from manufacturing floor to store, according to an analyst note published last week.

The company's new Speedfactory concept focuses on automated, localised manufacturing, and currently operates from a first facility in Germany, with a second in Atlanta in the US due to be fully functional by the end of 2017.

This and other initiatives will be able to significantly improve lead times and inventory turns, according to Cowen & Co. The analysts note that just 10% of the business is currently manufactured on 45 days or less from manufacturing floor to store calendars.

"The goal is to improve this to 50% of the business in coming years, which plays a significant role in improving gross margin," and increasing full-price sell-through, they add.

The facilities should also increase the potential for limited releases of new product "which have enhanced the brand's perception."

Adidas unveils first Speedfactory running shoe

The analysts also believe Adidas is gaining ground on rivals Nike and Under Armour in North America thanks to the addition of three former Nike designers to its new creative studio in Brooklyn – who also have a large impact on the product design of products sold globally.

The analysts add: "Adidas acknowledged that it needed to improve the brand's perception among high school and college athletes by focusing on grassroots marketing campaigns combined with key athlete endorsers."

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They also see double-digit sales growth in North America in 2017 for the Adidas brand, which will put further pressure on Nike and Under Armour, "both of whom are more promotional in North America than in prior years."

And they are encouraged by the just-announced restructuring of the Reebok business by Adidas Group's new CEO Kasper Rorsted as "a positive sign that he is not content with the brand's underperformance in the past several years."

Restructuring measures include the relocation of Reebok's North American HQ to Boston and the reshuffling of 650 hundred employees to Adidas's North America HQ in Portland, Oregon.

Adidas to revamp Reebok as profit growth slows

Rorsted, who has now been running Adidas for just over two months, "is likely to spend a significant amount of his time each year in the US as he recognises the significant room for improvement for both Adidas and Reebok in this key market."

Cowen & Co believes recent results from Under Armour and Nike show the competitive environment is increasing, and that Adidas continues to outperform Nike in terms of sales and EPS growth rates as new products, successful collaborations with celebrity endorsers and a focus on casual trends continue to drive growth.

Last week Adidas opened its brand flagship and largest worldwide store in New York, the latest in a series of investments to win consumers in the city seen as key to the company's strategic 'Creating the New' business plan aimed at driving top and bottom-line growth.

The move comes ahead of similar flagship plans in the city by Under Armour and Nike, and is part of efforts by the companies to get closer to the consumer and present their products and brands in an environment over which they have control.

Adidas NYC flagship raises the bar on sport stores