Specialist
Former VP at Nike Inc.
Agenda
- Organic sales growth outlook and drivers of Adidas's (ETR: ADS) recent underperformance in China, highlighting coronavirus, supply chain issues and stale product mix
- Range improvement opportunities across running, basketball and women’s apparel battlegrounds, touching on product and price positioning
- Distribution analysis – store optimisation opportunities across franchised and directly owned, plus online sales outlook
- 2021-23 operating margin outlook
Questions
1.
Adidas posted negative top-line results in the most recent reported period, partly blaming coronavirus restrictions. What do you think is driving the underlying negative sales results for the brand in China?
2.
If revenue declined 15%, what proportion of this would be coronavirus-driven vs due to the underlying issues you outlined?
3.
To what extent is the Uyghur scandal still having a negative impact on sales? There was a boycott of western brands earlier in the year and Adidas took quite a firm stance on the issue.
4.
What medium-to-long-term threat do domestic brands present to players such as Adidas in China?
5.
You said Adidas still has a large opportunity in China. How do you assess the potential for market slowdown?
6.
Why do you expect mid-single-digit market growth in the short term and a return to double digits in the medium-to-long term? What are the assumptions behind this?
7.
What’s your outlook on Adidas in Q4 2021 and into 2022? You’ve mentioned short-term pressure, and I think there’s a big fear of continued underperformance after the 15% revenue decline in Greater China in Q3 2021.
8.
We’re hearing about range improvement from Adidas in light of the demand scenario. What changes are required to revamp the stale product mix, breaking this down by category?
9.
We’re hearing about range improvement from Adidas in light of the demand scenario. What changes are required to revamp the stale product mix, breaking this down by category?
10.
Adidas is talking about pushing to one-third of the product being specific to China. Is this too much or not enough?
11.
How successful has Adidas been with women in China? You mentioned women’s apparel being core to growth, which is a global story too.
12.
How large a customer group are women in China for Adidas? How is this likely to change given the increased focus on performance and related trends?
13.
What changes are required in the women’s category to engage with this growing customer base?
14.
How successful has Adidas been at engaging with generation Z in China?
15.
How well-positioned is Adidas’s pricing? Can the pricing architecture be improved, and if so, how?
16.
What percentage of the total SKU count may need to be cut? What is required to optimise it?
17.
How does Adidas approach its channel mix in China across retail, wholesale and online? How does it think about the channels strategically?
18.
How does Adidas approach third party vs D2C in the online segment, given you mentioned some partners?
19.
Could you estimate online’s penetration of Adidas’s total channel mix in China? How is this likely to grow over the next 3-5 years?
20.
What does the online growth mean for the franchised network?
21.
How could online growth affect Adidas’s profitability? How do the franchise and directly operated store channels compare to online in China?
22.
Gross margins are hovering around the low-to-mid-50s in China for Adidas. How sustainable is this given the demand scenario and supply chain disruptions?
23.
To what extent can potential inflation from supply chain pressures be passed on to customers through price hikes?
24.
Which categories have the most scope to pass on price increases?
25.
What marketing spend relative to sales is necessary to reinvigorate demand in China? How is this ratio likely to change amid the challenging demand environment?
26.
What’s your long-term outlook on operating margins in China? I know Adidas has spoken about anything well above 30%, but what do you consider sustainable?
