4. The American sporting-goods industry has seen a broad contraction over the la
ID: 349241 • Letter: 4
Question
4. The American sporting-goods industry has seen a broad contraction over the last year, according to the article. How can Adidas best position itself here? What is Adidas' plan? Does it sound like a solid plan?
The article:
Adidas AG's new chief executive promised to increase sales and boost profits faster than his predecessor, saying the German athletic-gear giant could overcome challenges elsewhere in the sporting-goods industry.
Kasper Rorsted, who took over in October, said in an interview Wednesday that the improved profitability would come from selling more full-priced products and improvements to the supply chain, as well as foreign-exchange benefits.
Mr. Rorsted said Adidas is working to bring products to market in-season in order to mitigate inventory losses, and pointed to the development of new factories at production partner BASF SE, which makes the Boost material used in some of Adidas' most popular sneakers.
"Boost is one where we left a lot of money on the table," he said of recent results, adding that sneakers that contain the white, spongy-looking material like the NMD, the Ultra Boost, and others have been consistently sold out because of an inability to keep up with demand. Adidas has already established a new factory in Germany and is planning to open another in Atlanta this year to help speed its own product production.
The company on Wednesday raised its sales forecast to increase at a currency-neutral rate between 10% and 12% a year on average through 2020. Previously, it targeted an increase at a high-single-digit rate. Net income from continuing operations is projected to rise between 20% and 22% a year on average in the period, up from a previous forecast of around 15%.
Adidas is in the midst of an overhaul focused on shedding underperforming operations and beefing up results in the important U.S. market, where it competes with Nike Inc. and Under Armour Inc. The American sporting-goods industry has seen a broad contraction over the last year, with bankruptcies and liquidations at several retailers as manufacturers have worked to drive more direct sales.
Dick's Sporting Goods Inc., one of the largest U.S.-based chains, said Tuesday it would shed a fifth of brands it carries as it expands distribution of major vendors' products, including those of Adidas.
The sports apparel and footwear industry has grappled with a shift in consumer taste away from performance wear toward casual, fashion-forward looks. Such changes are evident at Adidas, where sales of lifestyle-oriented products rose 45% for the year, while performance products rose 13%.
Mr. Rorsted cautioned that the performance business accounts for about 70% of Adidas brand sales, and that the division between performance and fashion products is blurring.
Adidas's net loss in the three months ended December narrowed to EUR10 million (about $10.5 million) from a EUR44 million loss a year earlier. Sales increased to EUR4.69 billion from EUR4.17 billion, boosted by growth in its running category.
Adidas said it would continue to sharpen its focus on the Adidas and Reebok brands and whittle away at noncore operations. The company is now seeking a buyer for its ice-hockey brand CCM Hockey, and said the sales process for the golf brands TaylorMade, Adams Golf and Ashworth, is on track.
Explanation / Answer
Adidas is German sportswear giant whose revenue value is around 19.291 billion euros. they are 90 years old company who rule the sports sector of the world when it comes to wearing sports shoes. adidas make its position very well and now they stand a full flash brand whose market value is equal to some small countries GDP. they rank several times among the people while choosing something related to sportswear. they constantly improving themselves throughout these long journey. adidas try several things to maintain this position where they are standing now in the whole world, they always think of growing like other but what makes them different is not how they grow but how they affect the people living in a good way while growing.
after Mr. rorsted take in charge, he mainly focuses on selling full price product and try to improve there supply chain management. and for that, they need to reduce their inventory cost while increasing there profitability. he is planning to control the problem of out of demand product which needed to make the product for that, they are thinking of setting up some own production unit in Atlanta. they constantly focus on an underperforming operation which helps in U.S market too. they know the effect of sports company are making on the market when they turn bankrupt. adidas is also searching a buyer for its ice-hockey brand while other sports like golf etc are on track which helps then to make more interactive with the different customer which prefer the different taste.
by some means, this whole plan sound appealing but as their competitors also are the big name in the market they also plan in this way. so to make this plan more solid they need to focus on every details factor which gets neglect while fulfilling the big targets, by that they get an edge over others. they can have more faces for their brand in different countries to get more connected to the people sentiments.
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