Strategy

With sport playing an increasingly important role in more and more peoples’ lives, both on and off the field of play, we operate in a highly attractive industry. Based on our deep understanding of our consumer and the authenticity of the adidas brand, we push the boundaries of products, experiences and services. We do so according to our strategy, which allows us to fully capitalize on the acceleration of favorable long-term structural trends.

Review of strategy: ‘Creating the New’

‘Creating the New’ was our strategy for the period from 2015 to 2020. Our ambition to drive top- and bottom-line growth by significantly increasing brand desirability was at the core of ‘Creating the New’ – a strategy that proved to be very successful.

We were firmly on track to deliver on our 2020 financial ambition, having raised our targets twice during the strategic cycle. This is reflected by the company’s results for the period from 2015 to 2019, prior to the coronavirus pandemic:

• Net sales: Currency-neutral net sales increased at a rate of 12% per annum on average between 2015 and 2019, in line with our ambition from March 2018 of between 10% and 12% between 2015 and 2020 (initial ambition from March 2015 was high-single-digit growth).
• Operating margin: Reached a level of 11.3% in 2019, in line with our ambition from March 2018 of up to 11.5% by 2020 (initial ambition from March 2015 was around 10%).
• Net income from continuing operations: Grew at a rate of 28% per annum on average between 2015 and 2019, ahead of our ambition from March 2018 of between 22% and 24% between 2015 and 2020 (initial ambition from March 2015 was around 15%).

Ultimately, the financial ambitions for 2020 were not met due to the impact of the global coronavirus pandemic. Aside from financials, we executed on the three strategic choices of ‘Creating the New’ as introduced in March 2015 – Speed, Cities, and Open Source – all the way to the finish line of the strategic cycle. As a result, we not only established new iconic product franchises, such as Ultraboost and NMD, but also built and scaled innovative capabilities, many of which did not previously exist in our industry. These include the groundbreaking partnerships with Parley for the Oceans and Carbon, the creative collaborations with Kanye West, Pharrell Williams and Beyoncé, the shortening of lead times through speed-enabled ranges, and the creation of end-to-end consumer ecosystems in global megacities.

The execution of our Creating the New ‘Acceleration Plan’, which was introduced in March 2017, yielded the profitability turnaround of Reebok and the divestiture of CCM Hockey, the significant strengthening of adidas’ positioning in North America, the relentless standardization of processes under ONE adidas, and the successful digital transformation of our company. The latter resulted in overproportionate growth in the company’s e-com business, which generated more than € 4 billion in net sales in 2020 – more than twice the initial ambition from March 2015.

The many achievements resulting from these initiatives form the foundation upon which we have built our new strategy for the period until 2025, grounded in our purpose, mission, and attitude.

Our purpose: Through sport, we have the power to change lives

We will always strive to expand the limits of human possibilities, to include and unite people in sport and to create a more sustainable world.

Our mission: To be the best sports brand in the world

We are the best when we are the credible, inclusive, and sustainable leader with a first or second position regarding market share in each strategic category in the long term.

Our attitude: Impossible is nothing

We are rebellious optimists driven by action, with a desire to shape a better future together. We see the world of sport and culture with possibility where others only see the impossible.

New strategy ‘Own the Game’ for the period until 2025

‘Own the Game’ is our strategy that guides us through to 2025 – a plan rooted in sport. Sport is adidas’ past, present and future. ‘Own the Game’ puts the consumer at the heart of everything we do and is brought to life by our people. Our strategic focus is on increasing brand credibility, elevating the experience for our consumer and pushing the boundaries in sustainability. The execution of our strategy is enabled by a mindset of innovation across all dimensions of our business as well as our digital transformation. We own the game and will drive significant growth.

Consumer

Our consumers are at the heart of ‘Own the Game’. Consumers drive structural trends in our industry through their preferences and behaviors. They strive to live active and healthy lives, they wish to blend sport and lifestyle, and they are digital by default as well as sustainable by conviction. ‘Own the Game’ will be ready to capture those consumer-driven opportunities and carve out new ones for their benefit. In 2025, ‘Own the Game’ will not only have delivered overproportionate growth for adidas, but also deepened relationships with our consumer, as we continue to actively live our purpose ‘through sport, we have the power to change lives.’

People

To successfully deliver on our five-year strategy, we will support our people to truly own the game. We will make sure we have the relevant capabilities to tackle our business needs and seize opportunities as we attract, grow and retain talent. We will ensure there is a level playing field for all as we continue our diversity and inclusion journey. Furthermore, we will leverage our unique workplace that has the consumer at the heart of everything we do.

Credibility

We are a leading brand thanks to our credibility in both sport and culture. To continue to excite our consumers with innovative concepts that support our mission, we will sharpen our brand, refine our product offering and leverage partnerships to further enhance our credibility with consumers.

• Sport: We will focus on the most important sport categories: Football, Training, Running, and Outdoor. Football is the biggest sport in terms of viewership, while Running, Training, and Outdoor are the biggest participation sports. Our products in these categories are built for sport and worn for sport.
• Lifestyle: To tap into the biggest commercial opportunity for our brand, we will sharpen our brand architecture by introducing a new consumer proposition called Sportswear. These products are born from sport and worn for style. At the same time, we will extend Originals, which is inspired by sport and worn on the street, into the premium segment through top-quality manufacturing processes and materials.
• Women: We will execute on a cross-category plan to achieve product excellence and elevate the women’s experience through our membership program to become her indispensable sports brand. Our goal is to grow currency-neutral net sales for our Women’s business at a mid-teens rate per annum on average until 2025, thereby significantly increasing the Women’s share of our overall business.
• Partnerships: We will amplify our credibility through our partnerships by leveraging their power, authenticity, and reach. We will expand our portfolio of partners, which already includes Beyoncé, Kanye West, Stella McCartney and Pharrell Williams, all of whom will continue to play a significant role in wowing our consumer on the lifestyle side. Likewise, we will continue to leverage our partnerships with the biggest symbols in sport, be it with teams like Bayern Munich or Real Madrid, athletes like Lionel Messi or Mikaela Shiffrin, or events like the Boston and Berlin Marathons.

Experience

To grow long-term relationships with our consumer, we excite and empower them by creating personalized experiences in both digital and physical spaces. With this in mind, we will accelerate our transformation into a direct-to-consumer-led (DTC-led) business built around membership.

• Membership: With the launch of our membership program in 2018, we laid the foundation for offering personalized experiences to our most valuable consumers. We are now ready to take this to the next level with the goal of increasing our member base to around 500 million by 2025. Through membership, we reward engagement and purchasing activity by offering exclusive hype products, access to launches and special events, and more.
• DTC-led: E-com continues to be our most important store. Both adidas.com and the adidas app will see enhancements across the entire consumer journey. By 2025, our e-com business is expected to account for between € 8 billion and € 9 billion of our company’s net sales. While e-com is the pinnacle of our retail strategy, our physical stores will continue to play a crucial role in creating a physical and emotional connection with our brand. Retail formats will be digitized with fully-fledged omnichannel capabilities. The DTC business, comprising our e-com as well as our physical stores, is projected to account for around half of the company’s net sales by 2025. We will also continue to leverage our strong relationships with strictly selected wholesale partners and ‘win-with-the-winners’ to ensure a holistic experience for the consumer no matter the point of sale.
• Key Cities: We are building on our Key Cities portfolio of London, Los Angeles, New York, Paris, Shanghai and Tokyo, by adding Mexico City, Berlin, Moscow, Dubai, Beijing and Seoul. These cities represent the beating heart of our global consumer experience and exert influence on the rest of the world, while at the same time offering commercial opportunities as urbanization continues.
• Strategic markets: We will double down on Greater China, North America and EMEA to bring exciting consumer experiences to life, pursuing a tailored approach that appeals to local trends. Our ambition is to gain market share in all three strategic markets.

Sustainability

Our commitment to sustainability is truly holistic and deeply embedded into how we have done business for over two decades. Its rooted in our purpose that, through sport, we have the power to change lives. As we continue to pioneer in sustainability, we will move from strong stand-alone initiatives to a scaled and comprehensive sustainability program.

• What we offer: We keep pushing the boundaries of our sustainable offering, so that our consumer will be able to choose from a uniquely comprehensive range. By 2025, nine out of ten of our articles will be sustainable. How we will do this revolves around how we expand and innovate our 3-loops: made from recycled materials, made to be remade, or made with natural and renewable materials. We define products as sustainable when they show environmental benefits versus conventional products due to the materials used or their respective production technologies.
• What we do: We are committed to reducing the CO₂ footprint of our product offerings as we work to reach climate neutrality by 2050. We will achieve this through initiatives such as driving zero-carbon within our own operations and promoting environmental programs along our entire value chain in close cooperation with our suppliers.
• What we say: We will be vocal about our efforts that focus on creating low-impact products that are made to be remade. To guide our consumer to make more sustainable choices, we will also simplify our labelling strategy and scale up our product takeback program.

Innovation and Digital

Two enablers will set us up for success. The first is applying a mindset of deep and broad innovation across all dimensions of our business. The second is using the speed and agility of Digital throughout our entire value chain. These enablers will be particularly powerful when it comes to executing on the three strategic focus areas – Credibility, Experience, and Sustainability – that support us in intensifying our focus on the consumer and driving growth.

Financial ambition for 2025

‘Own the Game’ is designed to yield growth in terms of revenue, profitability and cash generation, which in turn creates long-term value for our shareholders. Therefore, we are focused on rigorously driving execution and managing all of the factors under our control, which will enable us to:

• Achieve top-line growth above industry average: We aim to increase currency-neutral revenue at a rate of between 8% and 10% per annum on average in the four-year period between 2021 and 2025.
• Further expand both gross and operating margin: We expect to expand our gross margin to a level of between 53% and 55% and our operating margin to a level of between 12% and 14% by 2025.
• Grow our bottom-line sustainably: We plan to grow our net income from continuing operations by an average of between 16% and 18% per annum in the four-year period between 2021 and 2025.
• Invest into future organic growth: We are committed to reinvesting between 3% and 4% of net sales into our business by means of annual capital expenditure.
• Deliver attractive cash return to shareholders: Based on the material growth in terms of revenue and profitability, we will generate substantial cumulative free cash flow until 2025. The majority of it – between € 8 billion and € 9 billion – will be made available and distributed to shareholders through a consistent dividend pay-out in a range between 30% and 50% of net income from continuing operations, complemented by share buybacks.

Given the prevailing uncertainties related to the further development of the coronavirus pandemic, our financial ambition for 2025 has 2021 – rather than 2020 – as a baseline. However, this does not apply to the strategy as such, which will be executed throughout the entire five-year strategic cycle.

As a global leader in our industry with a strong strategy in place, we are very well positioned for the years ahead.