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Our reporter Zhou Mengting (chinatimes.net.cn) reports from Beijing

Adidas, which "showed its prowess" at the Paris Olympics, was the first to hand in a decent report card during the Paris Olympics. On July 31, the company released its financial report showing that its revenue in the first half of this year increased by 6.2% year-on-year, and its net profit attributable to shareholders soared by 701.3% year-on-year.

2024 is a big year for sports, with world-renowned sports events such as the America's Cup, the European Cup, and the Olympics taking place one after another. Adidas has invested heavily in these events, and has appeared in all three major events. At the same time, in the Paris Olympics currently being held, Adidas is the sports brand with the most events covered. At the same time, the company's marketing and sales expenses have also increased by 11.9% year-on-year since the decline in 2023, reaching 1.363 billion euros (about 10.63 billion yuan).

A report card that exceeds expectations

Adidas, which has participated in the three major global sports events of this year's European Cup, America's Cup and Paris Olympics, has reaped the fruits of a rich harvest. On July 31, Adidas released its second quarter and first half financial report for 2024. In the first half of this year, its revenue reached 11.28 billion euros, a year-on-year increase of 6.2%; its net profit attributable to the parent company was 360 million euros, a year-on-year increase of 701.3%; in the second quarter, its revenue was 5.822 billion euros, a year-on-year increase of 8.9%, and its net profit attributable to the parent company was 190 million euros, a year-on-year increase of 125.8%.

In the information provided by Adidas to the China Times reporter on July 31, the company bluntly stated that the second quarter of 2024 was a "report card" that exceeded expectations. Adidas also stated in the financial report that based on the better-than-expected performance in the second quarter, the company raised its full-year performance guidance; Adidas expects revenue to grow at a high single-digit rate in 2024, with operating profit of around 1 billion euros.

While global performance growth exceeded expectations, Adidas was also relatively satisfied with the performance of Greater China, one of its most important strategic markets. The financial report showed that in the first half of this year, Greater China contributed 1.719 billion euros in revenue, a year-on-year increase of 4.2%, and a year-on-year increase of 8.5% under currency neutrality, accounting for 15.2% of its total revenue. In the second quarter, Greater China achieved revenue of 822 million euros, a year-on-year increase of 7.4%, and a year-on-year increase of 9.3% under currency neutrality.

Regarding the second quarter performance of Greater China, Adidas said in a conference call held on the same day that "compared with all Western brands, the 9% growth and share in the Chinese market is a respectable result." According to our reporter, in the first half of this year, Adidas opened more than 100 new stores in China and increased the proportion of "Made in China" to 75%.

Sports marketing boom

Behind Adidas's improved performance is its generous investment in sports marketing. 2024 is a big year for sports, with the European Cup, the America's Cup and the Paris Olympics, and Adidas is participating in each of them.

Our reporter learned from Adidas that in the Paris Olympics, Adidas was the sports brand covering the most events, with 49 pairs of sports shoes covering 41 professional events; at the European Cup held in June, Adidas provided match balls, uniforms for six national teams, and sponsored elite athletes, etc. At the America's Cup, Adidas sponsored eight national teams, and ultimately the Argentina team it supported managed to defend its title and win the America's Cup trophy for the 16th time.

As for the reasons for the performance growth, Adidas mentioned in the information provided to our reporter that accelerating the return to the original intention of sports is one of the cornerstones of Adidas' performance growth. Xiao Jiale, Managing Director of Adidas Greater China, also said, "In the first half of 2024, major sports events such as the European Cup, the America's Cup, and the Paris Olympics ignited the enthusiasm of mass sports consumption. Adidas continued to win the favor of consumers with its product strength, technological strength, and brand strength."

Behind Adidas' active participation in major sporting events this year is the growth of its marketing and sales expenses. According to the financial report, in the first half of this year, Adidas' marketing and sales expenses were 1.363 billion euros, an increase of 11.9% year-on-year, and the sales expense ratio was 12.1%.

In fact, Adidas has never been stingy when it comes to marketing and sales expenses. According to the financial report, from 2021 to 2023, Adidas' marketing and sales expenses will be 2.547 billion euros, 2.763 billion euros, and 2.528 billion euros, respectively, accounting for 12%, 12.3%, and 11.8% of its revenue, respectively.

However, compared with Nike, Adidas' sales expense ratio is not high. In the fiscal year 2024 ending May 31, 2024, Nike's total sales and administrative expenses were US$16.576 billion, accounting for 32.3% of its revenue.

“A more localized model will be adopted”

In the previous two years, Adidas' performance in Greater China has been sluggish. From 2021 to 2023, its revenue in Greater China was 4.597 billion euros, 3.179 billion euros, and 3.19 billion euros, respectively. But even though there was an increase in the first half of this year, Adidas' revenue in Greater China has not returned to its peak.

Behind Adidas' sluggish revenue in Greater China is the rise of Chinese local brands. From 2021 to 2023, the revenue of Anta Sports, Li Ning, and Xtep International all achieved significant growth. Among them, Anta Sports' revenue grew from 35.512 billion yuan in 2020 to 62.356 billion yuan in 2023, an increase of 76%; Li Ning grew from 14.457 billion yuan to 27.598 billion yuan, an increase of more than 90%, and Xtep International grew from 8.172 billion yuan in 2020 to 14.345 billion yuan in 2023, an increase of 75.5%. According to existing data, in the first half of this year, all brands under Anta Sports achieved positive growth; Xtep International's retail sales achieved high single-digit growth.

In a conference call held on July 31, Adidas also admitted that "the Chinese market has changed a lot in the past four years. Before the epidemic, this market was dominated by Western brands. Now, local brands have occupied a large share and established a more vertical business model, many of which are manufacturers directly entering retail and opening their own stores. So the speed they have and the price they give to consumers are different from before. We are working hard to adapt to this. After going through a very difficult period, we will adopt a more localized model."

The rapid growth of Chinese local brands in the domestic market has brought new challenges to international brands. However, Cheng Weixiong, an independent fashion industry analyst and founder of Shanghai Liangqi Brand Management Co., Ltd., told our reporter, "Although local brands have formed a certain competitiveness against international brands such as Adidas and Nike, this is more concentrated in the low-end market. International brands still have more advantages in the mid-to-high-end market."

However, in the mid-to-high-end sportswear market, emerging foreign brands such as lululemon and Aonpao are making a fierce impact on the Chinese market. Against this backdrop, Adidas said it would continue to increase cooperation with top Chinese athletes. According to Xiao Jiale, "We will continue to adhere to the principle of 'in China, for China', adhere to innovation-driven development, and continue to increase cooperation with top Chinese athletes, designers, manufacturers, and retailers to provide Chinese consumers with better product and service experiences."

Editor-in-charge: Huang Xingli Chief Editor: Han Feng