Dusseldorf—The No. 2 in sports brands is hoping for a first place finish soon. Adidas Group has unveiled a five-year strategy aimed at ousting Nike as the world’s leading sporting goods company.Adidas told investors in Germany today that it plans to grow sales by 50% to $24 billion by 2015.
It also forecast compounded annual earnings growth rate of 15% per year for the period. In May, Nike said it was targeting revenues of $27 billion by the end of fiscal 2015, led by growth in emerging markets and hundreds of new Nike stores. So even if both companies hit their projections, Nike may still remain larger.
‘Route 2015:’ The Road to the Top?
Adidas’ strategic plan, called Route 2015, will focus on growing its bottom line faster than its top line, the company said. It is targeting an operating margin of 11% by 2015, for instance.”The group plans to lay the foundation for leadership in the sporting goods industry by outgrowing its major competitor in the next five years,” said Herbert Hainer, ceo of the Adidas Group.
“Since we launched our first growth initiative back in 2001, we have fundamentally redefined the competitive landscape of our industry and have now created what is universally acknowledged as a global two-horse race. From 2001 to 2010, our sales will have doubled to well over 11billlion euros. Our net income over this same period will have almost tripled, to expected earnings of between 560 and 565 million euroes in 2010,” Hainer added. “Therefore, we are now well prepared to enter our next growth phase based on our mission to be the leading sporting goods company in the world.”
Adidas said its key growth markets would be North America, Greater China, Russia/CIS, Latin America, Japan, Britain and India. Hainer said 50% of sales growth would come from just three of these markets” the United States, China and Russia. The company’s Adidas and Reebok brands would account for more than 90% of the planned 45 to 50% increase in sales.
Q3 Results: 25% Increase in Profits
The announcement of the Route 2015 plan follows Adidas’ strong third quarter growth reported last week Soccer-related revenue helped Adidas to post a 25% increase in third quarter net profit. Comparable retail store sales were up 10% on a currency-neutral basis in the three months to September 30, the company added.
“All key brand initiatives continued to resonate with consumers around the world,” said Hainer. “Double-digit revenue growth in football, Adidas Sport Style and Reebok year-to-date, as well as a resumption of growth in Greater China in the third quarter, all reflect a well-executed 2010 strategy.”
However, the company warned that rising input and labor costs, as well as currency volatility, could impact group profitability.