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Adidas Adjusts to Changing Landscape

Adidas ZX 2K Boost.

The global COVID-19 pandemic, the postponed 2020 Tokyo Olympics and rising digital movement have pushed the Three Stripes to make changes to its business approach.

After adjusting second half product orders in April, Herzogenaurach, Germany-based Adidas began implementing an inventory liquidation plan that will make calendar year-end levels “normalized” and on par with the December 2019 total. The strategy involves holding back event-related, evergreen products for repurposed 2021 launches; moving the majority of remaining excess inventory through its 1,100 global factory outlet locations; and selling the remainder to select retail partners. The company does not expect the current level of promotional activity to worsen in the second half of 2020.

Anticipating 2021 as a “big sports year” around the globe with Euro 2020 soccer tournament and aforementioned Tokyo Games, Adidas has delayed the launch date of its Euro 2020 soccer boot until next year; adjusted its launch calendar for other key products such as the ZX 2K Boost; and shifted part of its Olympics product range to its “Ready for Sport” campaign that features athletes wearing Adi gear for another year of dedicated training ahead of their Olympic competitions.

During the second quarter, Adidas North America revenues dipped 37 percent, largely due to store closures, and period e-commerce sales soared 93 percent. But the exceptional growth led to higher costs for logistics, freight and additional warehouse capacity and staff to meet shipment demands. Going forward, Adidas will likely need to invest in a dedicated distribution facility for Direct-to-Consumer orders.

Adidas Group CFO Harm Ohlmeyer told analysts that the fast-accelerating DTC landscape hasn’t altered the company’s view on its own stores and that of its most-valued wholesale partners.

“We have an opportunity to sell deeper and more frequently to the consumer, along with the wholesale partners with who we can digitally engage like the JDs, Dick’s Sporting Goods, the Foot Lockers… The struggling part of the partners are going to be those who do not manage the digital integration with their suppliers in the future,” he said.

At the brand’s annual general meeting, held Aug. 11 at the brand’s headquarters, the firm’s Supervisory Board announced that members would waive 30 percent of their compensation for the financial year. The money will be donated to SOS Children’s Villages and other nonprofits.