Illustration of Opportunities

In this report, we illustrate opportunities considered most relevant in 2020 and beyond. According to our assessment methodology, macroeconomic, sociopolitical, regulatory and currency opportunities as well as opportunities related to sustainability are considered material. Our presentation of opportunities in this year’s Annual Report differs slightly from the 2018 Annual Report as we changed risk and opportunity categories and therefore consolidated individual opportunities based on these updated categories. Changes in risk assessment are shown on a comparable basis. The assessment is illustrated in the opportunities overview table.

Macroeconomic, sociopolitical, regulatory and currency opportunities

Legislative and regulatory changes such as the elimination of trade barriers due to free trade agreements (e.g. between the European Union and Vietnam) can create cost savings or potentially open up new channels of distribution and, as a result, positively impact profitability. Changes in local tax or customs regulations (e.g. reduction of tax rates on private incomes, reduction of import duties) could lead to increased consumer spending and consequently positively affect our sales or result in additional cost savings. Favorable exchange rate developments can potentially have a positive impact on the company’s financial results. Translation effects from the conversion of non-euro-denominated results into our company’s functional currency, the euro, might also positively impact our company’s financial performance. see treasury

Opportunities related to sustainability

We believe that a continued focus on sustainability represents an opportunity for the company, in particular in the medium to long term. While we have already been very successful with our sustainability efforts, we see further upside potential leveraging our leadership position. see sustainability Consumers are increasingly looking for products composed of more sustainable materials and manufactured in an innovative and yet socially and environmentally responsible way. By further strengthening our sustainability focus in our marketing and product creation activities, for example in the Outdoor category, we may generate additional sales growth and drive profitability improvements.

Opportunities related to distribution strategy

The sporting goods retail environment is changing constantly. We therefore continue to adapt our distribution strategy and have made controlled space initiatives a priority. This includes the further expansion of our own e-commerce activities, the optimization of our network of wholesale partners with a clear focus on partners that provide consumers with the best shopping experience and customer service, retail space management with key accounts (online and brick & mortar), as well as the introduction and roll-out of new own-retail store formats. Successful results from these initiatives could enable us to accelerate top- and bottom-line growth. see sales and distribution strategy

Opportunities related to tax regulations

The potential release of valuation allowances on deferred tax assets, for example in the US, could result in an increase of deferred tax assets and positively impact income tax expense. In addition, changes in local tax regulations may offer the company the option to realize benefits that could result in a reduction of tax expenses and higher net income.

Opportunities related to data analytics

Data and analytics play a crucial role in enabling fact-based decision-making. Therefore, we have a dedicated Data & Analytics team to drive business decision-making by leveraging the power of data. The continuous enhancement of our existing capabilities to build and scale insights-driven use cases and the use of the latest technology could bring value to our business operations across the entire company. As a result, we see the opportunity to become faster and more efficient in our operations. We may increase visibility and understanding of consumer preferences, increase full-price sales, reduce discounts and optimize order book management, inventory management and purchasing. This could result in improved financial performance.

Opportunities related to process optimization

Continued optimization of key business processes and strict cost control are vital to achieving high profitability and return on invested capital. We are confident that there is still a substantial opportunity to improve process efficiency and effectiveness and further streamline cost structures throughout our company. Consequently, we will continue to focus on driving the standardization and harmonization of processes, as reflected by the company’s ‘ONE adidas’ initiative. see corporate strategy