Adidas suffered a negative sales growth in the first quarter

Adidas, who had always dreamed of catching up with Nike, had a bad start in 2009. All business unit sales were negative growth.

Obese people run hard to get up and start to struggle. Today, the sports brand Adidas has also encountered such embarrassment.

On May 5th, Adidas Group released the financial report for the first quarter of this year. All business unit sales of the group were negative growth, which was “a drop of noise”: Adidas brand sales fell 6%, Reebok brand sales fell 4%. ,Adidas golf brand TaylorMade sales fell 6%, mergers and businesses dropped 10%......

In the face of these negative growth, Adidas’ net profit in the first quarter was only a poor 9 million euros. Compared with the net profit of 250 million euros in the same period of last year, it dropped by 97% year-on-year! It should be noted that although the market has already lowered Adidas's net profit forecast for the first quarter, it also gives a forecast of 97 million yuan.

After a bumper harvest in 2008, Adidas ushered in a bad start in 2009.

“Over-optimistic estimates of consumer demand in 2009.” Adidas explained the poor performance of the first quarter. In the statement made by Adidas, rising costs, currency devaluation, intensified market challenges, and increased restructuring costs are the reasons for its poor performance. In addition, it is “unavoidably affected by the financial crisis”.

However, the outside world has mostly focused on the huge inventory of this giant.

A month ago, the “Olympic Marketing Report” issued by the China Brand Academy stated that major Olympic sponsors such as Adidas, Hengyuanxiang, and Aokang had blindly increased production due to overoptimism in their estimates of Olympic operations, leading to inability to digest large quantities of stocks. In this report, Adidas ranked first in inventory with up to 1 billion yuan. Although Adidas responded to the report “without foundation”, in its 2008 annual report, it was still mentioned at an obscure point that “the value of inventory has increased by 22.5% from 2007”. Now, the new financial report in the first quarter shows that "the value of inventory in the first quarter rose by 28% from the same period in 2008 to as much as 2.016 billion euros."

After eight consecutive years of high-speed running with double-digit growth in net profit, he has been struggling to surpass Nike's German giant and had to figure out a "weight loss plan" that will allow him to run faster.

In fact, in the past seven months, Adidas has implemented a series of strategic reviews of the group and its brands, and decided to focus on businesses with business opportunities. Businesses that do not contribute to immediate business success are cut off. Adidas then took a series of actions, such as cutting down on employees of Reebok, Rockport and TaylorMade-Adidas Golf, integrating Ashworth acquired in November last year into the TaylorMade-adidas golf system, and implementing adidas and Reebok operations in Europe and Latin America.

“The current economic environment has increased the sense of urgency and we want to speed up the plan,” said Herbert Hainer, chairman and chief executive officer of adidas. "The first-quarter earnings report has shown that these weight loss plans in the past few months alone are obviously not enough.

Now, Adidas has proposed a larger scale of “slimming” plan: layoffs of about 1,000 people worldwide, restructuring wholesale business, canceling regional headquarters in Hong Kong and Europe, setting up a special retail management team to negotiate with regional teams to close down some of the branches. Heiner hopes that through these more powerful measures, Adidas can save 130 million US dollars in costs each year.

And outside speculation, in addition to the above-mentioned measures have been disclosed, the production line adjustment is also likely to be used by Adidas, which since the last year on the dusty Chinese factory relocation can glimpse the clues. According to the latest news, Dongguan Humenguanhe Sports Equipment Factory, the world's largest ball foundry for Adidas, has decided to relocate the production line at the end of the year. Hainer also confessed that he was clarified that "adidas plans to withdraw the Chinese production line" rumors, in China to provide 55% of its products, Adidas's cost pressures are getting higher and higher, the future will be more inclined to choose India, Laos, Cambodia, Vietnam, etc. Countries with cheaper labor costs set up factories. In fact, its old rival, Nike, has taken the first step in moving its sole shoe factory in China.

However, adidas seems to be more willing to put pressure on strengthening the construction of marketing and self-owned sales channels in the Chinese market. In 2008, Adidas brand had 1,332 direct sales stores in China, which contributed 18% of the Chinese market's turnover. In 2007, these two figures were 1003 and 17% respectively. One month before the opening of the Beijing Olympics, Adidas opened the largest brand center in the world's direct-operated stores in Beijing, and the store area reached an astonishing 3,170 square meters.

Ma Gang, an observer of sporting goods market, believes that in China, Adidas’ cross-border coverage of national and regional agents led to excessive purchases, and annual sales of several major agents such as Zibo Sports, Pou Sheng International and Shanghai Rui. Both have reached 2 billion and have strong bargaining power. Adidas's profit rate may therefore be dragged down. The increase of expansion stores can control costs and reduce dependence on channel agents.

Regarding the trend of sales in 2009, the frustrated adidas has lowered its stance of spurring forward last year. It is expected that the year will be a single-digit negative growth. But after launching a series of “slimming” moves, Hainer does not appear pessimistic: “In the past 8 years, our group has seen fantastic growth. Now, we must look forward and achieve a higher level for our company. In the mid-term and long-term success."