Footlocker targets over $2 billion in retail sales with Adidas

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The tie-up with Foot Locker came as Adidas reported a 3% decline in currency-neutral sales as supply constraints reduced revenue by €400m (€422.5m). dollars).

The new partnership sees Foot Locker become Adidas’ premier basketball category partner, accelerating energy and hype launches, as well as developing and expanding key franchises for women, kids and kids. clothes.

Including all Foot Locker banners in North America, EMEA and Asia Pacific, the new strategic partnership will target more than $2 billion in retail sales by 2025, nearly tripling 2021 levels. In 2022, Adidas expects to generate additional revenue of up to €100 million from the new partnership.

Earlier this year, Foot Locker said it would seek to accelerate its own direct-to-consumer efforts by launching a number of private label lines and building on existing relationships with brands such as New Balance, Puma and Crocs, after warning the direct from Nike. consumer focus would hurt revenue in 2022.

“We are excited to deepen our partnership with Foot Locker as we continue to execute on our ‘Own the Game’ strategy,” said Kasper Rorsted, CEO of Adidas. “Consumers will be at the heart of this exciting collaboration and will be able to experience the Adidas brand and its major product franchises, as well as new product innovations, at Foot Locker, stronger than ever.”

Richard Johnson, President and CEO of Foot Locker, added: “This close partnership will allow us to offer consumers even more unique and premium products from iconic brands, as well as accelerating our push into apparel. , adding a new dimension to our assortment and bringing more customers into our ecosystem.

To execute the new plan, Adidas will provide Foot Locker with a dedicated team to deliver an enhanced customer experience both in stores and online to help create demand and elevate the market. This will involve partnership on product development, exclusive Foot Locker positioning, increased product allocations, shared marketing spend and a high premium presence across Foot Locker’s entire banner portfolio, with a particular focus about the key cities and communities that the companies jointly serve.

Finally, to provide consumers with a seamless consumer journey both online and offline, the two partners will strengthen their digital orientation and accelerate the rollout of the Adidas Partner Program at Foot Locker.

Adidas Q1 figures reflect impact of supply constraints

  • Currency-neutral sales down 3% as supply constraints reduced sales by €400 million despite strong momentum in Western markets.
  • Market challenges, Covid lockdowns hamper growth in Greater China, APAC.
  • Sales in the EMEA region are most affected by supply shortages, with half of the total negative impact recorded in this market.
  • Gross margin decreased by 49.9% due to higher supply and freight costs, as well as a less favorable market mix and difficult conditions from the previous year.
  • Net income from continuing operations decreased to 310 million euros from 502 million euros a year earlier.

Outlook FY 2022 updated

Although several external factors continue to weigh on industry-wide demand and supply, Adidas confirms its 2022 revenue and earnings outlook. While the company continues to expect While currency-neutral revenue is growing at a rate of between 11% and 13%, growth is now expected to be at the lower end of this range due to the severe impact of the Covid-19 related lockdowns in China. As a result, net income from continuing operations is also expected to reach the lower end of the previously disclosed range between €1.8 billion and €1.9 billion.

Due to a less favorable market mix due to lower-than-expected revenues in Greater China, the company’s gross margin is now expected to be around the prior year level of 50.7% in 2022 (previously: between 51.5% and 52%).

Due to the latest widespread Covid-19 related lockdowns in China, which resulted in a large number of store closures as well as a sharp drop in traffic, even in parts of the country that are not directly affected, the company’s revenues Greater China is now expected to decline significantly in 2022. At the same time, initial growth targets for EMEA (teenage growth), North America, Latin America (teenage growth) and China Asia-Pacific (teenage growth), which together account for more than 80% of the company’s business, are confirmed and well supported by an extraordinarily strong order book. Strong underlying momentum in all Western markets and a return to double-digit growth in the company’s Asia-Pacific region should offset the lockdown-related revenue decline in Greater China.

Adidas expects to return to growth in the second quarter despite a continued decline in sales in Greater China and a negative impact of around 200 million euros related to supply chain constraints. In the second half, net sales are expected to grow by more than 20% thanks to an unconstrained supply combined with the strong momentum of Western markets, the acceleration of demand in Asia-Pacific, an exciting pipeline of innovative products as well as at major sporting events. .

“In this environment characterized by severe external challenges, it is imperative to remain focused on our strategic objectives. While we remain nimble, we will not compromise our long-term growth opportunity for short-term earnings optimization. We will continue to invest in our brand and partnerships, in our DTC business and in our digital capabilities to support revenue acceleration and market share gains in our growth markets in 2022,” adds Rorsted.

Darcey Jupp, apparel analyst at GlobalData, said: “Adidas’ fiscal 2022 certainly did not start as it would have hoped, continuing the pessimistic momentum of the fourth quarter of 2021 which was plagued by supply and demand side challenges.

“Adidas has consistently cited difficult trading conditions in Greater China as one of its top issues, with yet another poor quarter in the region as sales fell 34.6% on a currency-neutral basis. Adidas is not alone in its struggles in the country amid new COVID-19 shutdowns and as Chinese consumers turn away from Western brands in favor of domestic players, its problems are not limited to China, as its sales in Asia-Pacific fell 15.7%% on a currency-neutral basis.While Adidas acknowledges that it faces both supply and demand challenges, it refrains from truly acknowledging the global extent of its demand-side challenges, as the brand has consistently underperformed Nike and Puma, which are up 7.6% and 44.9% respectively in their comparative quarters vs. fiscal year 2019. This problem needs to be solved by Adidas l e as soon as possible, because he needs to understand why consumers favor his rivals, which could be due to poor marketing or weaker product lines. This will be especially important in fiscal year 2022 with rising inflation globally, as many consumers will abandon mass market players unless they believe a brand is worthwhile. to invest additional money.

“One of Adidas’ successes is its drive to increase direct-to-consumer (DTC) sales, and while its DTC channel saw a meager 1% currency-neutral growth this quarter, it topped the 2019 figure. net business and DTC sales increased 33% from Q1 FY2020. However, yesterday Adidas announced a long-term partnership with Foot Locker that aims to generate $2 billion in global revenue from 2025. While this deal seems at odds with its DTC strategy, the move smartly takes advantage of the recent news that Nike will be ending its wholesale partnerships with the retailer in its own DTC campaign. But as the shoe has often been the stumbling block of Adidas, the success of this strategy will go through an upheaval of its offer and its marketing.

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