Skip to main content
BoF Logo

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.

Adidas CEO Sees China Stabilising As US Grows

Kasper Rorsted said he expected to see China's huge operating margin in China to shrink slightly in the long term, while its small US margin grows in the near term.
Source: Shutterstock
By
  • Reuters

SHANGHAI, China — German sports apparel brand adidas AG expects its huge operating margin in China to shrink slightly in the long term, while its small US margin grows markedly in the near term, its new chief executive officer said on Thursday.

Kasper Rorsted, on his first visit to China since taking the helm in September, said adidas' margin in Greater China of 35 percent last year would "stabilise and slightly decline". Meanwhile North America, with a margin of 6.3 percent last year from 2.5 percent in 2015, was playing "catch-up".

"We expect a dramatic improvement in margins in the United States, but we expect over time also a slowdown in the margin development in China," he said, without detailing specifics.

The firm's Greater China sales, about half those of North America in 2013, reached 16 percent of its global total last year, just shy of North America's 18 percent.

ADVERTISEMENT

The sports apparel market, buoyed by supportive government policies and health-conscious consumers, has been a bright spot in China amid tougher conditions for firms from snack makers to cinema operators in the world's second-largest economy.

Rorsted said adidas would "invest heavily" in China, where he saw huge long-term potential. The firm is on track to add 2,000 stores in China and hit 12,000 by 2020.

The company forecasts "double digit" China growth this year, though Rorsted said this would be slower than in 2016 when adidas had sales of €3 billion ($3.21 billion) in the market, up 28 percent on 2015 before currency fluctuations.

China's wider retail market, however, remained tough, he said, despite an uptick in official data in the first quarter.

"What we are seeing, if you take the total industry, is a slowdown in retail," he said.

"Brick-and-mortar traditional and fast-moving consumer goods has dramatically slowed down. Traffic in large malls has slowed down. That is one trend and right now that's not being offset by anything," he said, without elaborating.

Rorsted added firms in apparel and footwear, which manufacture mostly in Asia, were not going to be relocating plants to Europe or the United States any time soon - something that has been on the agenda of new U.S. President Donald Trump.

"The size is these plants is humongous... They are highly automated today and the entire supplier base is based out of Asia," he said. "Just financially it's illogical and so it's highly unlikely that this will happen."

By Adam Jourdan; editor: Christopher Cushing.
In This Article
Topics
Organisations

© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions

More from Retail
Analysis and advice from the front lines of the retail transformation.

What a Fashion Company Is Worth Today

In an era of austerity on Wall Street, apparel businesses are more likely to be valued on their profits rather than sales, which usually means lower payouts for founders and investors. That is, if they can find a buyer in the first place.


What’s the Plan at H&M?

The fast fashion giant occupies a shrinking middle ground between Shein and Zara. New CEO Daniel Ervér can lay out the path forward when the company reports quarterly results this week.


view more

Subscribe to the BoF Daily Digest

The essential daily round-up of fashion news, analysis, and breaking news alerts.

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.
CONNECT WITH US ON
BoF Professional - How to Turn Data Into Meaningful Customer Connections
© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions, Privacy Policy, Cookie Policy and Accessibility Statement.
BoF Professional - How to Turn Data Into Meaningful Customer Connections