Illustration of Opportunities

In this report, we illustrate financial and non-financial opportunities considered most relevant in 2021 and beyond. According to our assessment methodology, opportunities related to consumer demand and product offering, opportunities related to the distribution strategy as well as opportunities related to data analytics, and opportunities related to a faster-than-expected recovery from the coronavirus pandemic are considered material. The assessment is illustrated in the opportunities overview table.

Opportunities related to consumer demand and product offering

Well-executed campaigns and marketing initiatives could increase brand desire and consumer appeal, which may drive full-price sell-through and result in higher-than-expected sales and profit. In addition, outstanding competitive performance of promotion partners such as individual athletes, club teams or national teams may further increase their popularity amongst consumers. As a result, adidas may generate higher sales of signature footwear or licensed apparel and accessories. We believe that our continued focus on product innovation and the ability to fully commercialize such innovation through an attractive product offering that resonates with consumers could provide further upside potential both in terms of sales and profit. In that respect, we see untapped potential particularly in sport-inspired apparel and in our women’s and kids’ business.

We are also convinced 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. Consumers are increasingly looking for products composed of more sustainable materials and manufactured in an innovative and yet socially and environmentally responsible way. By strengthening our sustainability focus in our marketing and product creation activities even further, we may generate additional sales growth and drive profitability improvements. See Sustainability

Opportunities related to the distribution strategy

The further expansion of our own e-commerce activities and the amplification of our digital partner commerce business could provide further upside potential in terms of sales and profit. In addition, improving order book conversion in our wholesale channel, where we clearly focus on partners that provide consumers with the best shopping experience and customer service, could result in higher-than-expected sales and profit.

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, apply these insights in our product creation and, as a result, increase sales and reduce cost of sales. Leveraging data may also help us optimize order book management, inventory management and purchasing. All of this could result in improved financial performance.

Opportunities related to faster-than-expected recovery from the coronavirus pandemic

Effective measures against the coronavirus pandemic (e.g. improved therapies and vaccination programs) could lead to a faster-than-expected recovery of the economy and the sporting goods industry. This could result in faster-than-expected growth of adidas net sales and profit. Furthermore, the sports industry could benefit from long-term trends amplified by the coronavirus pandemic such as the increasing penetration of sportswear (‘athleisure’) as well as rising awareness for health and wellness. These trends could positively impact adidas’ net sales growth in 2021 and beyond.

Macroeconomic, sociopolitical, regulatory and currency opportunities

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. Legislative and regulatory changes such as the elimination of trade barriers due to free trade agreements can create cost savings or potentially open up new channels of distribution and, as a result, positively impact profitability. 

Opportunities related to tax regulations

The potential release of valuation allowances on deferred tax assets or the release of tax risk reserves could 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.

Personnel opportunities

Creating and managing a performance-oriented culture that fosters diversity and inclusion as well as leadership accountability and clear values in the workplace could lead to increased diversity of thought, increased creativity and innovation and higher employee satisfaction and engagement. This may positively impact the company’s financial performance. A workforce that includes diverse talent and reflects the diversity of our customers and consumers, helps us better serve the communities we work in and strengthen brand reputation among our consumers, which could potentially create a competitive advantage and positively impact top- and bottom-line performance.