Premium play makes Adidas top sports goods maker in India

Dogged by controversies in the past, Adidas India seems to have turned the corner, becoming the largest in the branded sportswear market in the country. For 2014-15, Adidas clocked sales of Rs 805 crore, the highest among foreign sportswear companies in India. For 2014, Puma’s domestic unit clocked revenue of Rs 767 crore.

Puma follows the calendar year for reporting earnings. While Nike follows the April-March year, it is yet to report its latest earnings. For FY14, it had recorded revenue of Rs  624.2 crore.

In terms of profitability, too, Adidas has left its peers behind, with a jump of 49 per cent in net profit at Rs  56.04 crore. Puma registered a profit of Rs 29.09 crore for 2014.

Reebok India, owned by Adidas, reported Rs  333 crore of revenue for 2014-15, up 2.6 per cent year-on-year, and a loss of Rs 57.78 crore, against a profit of Rs 14.59 crore for 2013-14.

The Adidas management attributed the performance to strategic differentiation in product availability and store format among rural and urban regions. “We aim to make our products available and accessible across the country and continue to grow in smaller towns and metros,” said Dave Thomas, managing director, Adidas India.

Sources in the sector attribute the company’s performance to its prudent decision-making, in terms of opening stores. “After the Reebok incident, Adidas took stock of the situation and was able to take some uncomfortable decisions such as closing underperforming stores; these are showing results,” said a senior executive of a retail firm.

 

Earlier, in an interview with Business Standard, Dave Thomas had said, “On distribution front, we had some stores that were under-performing. So, we decided to shut those and concentrate on the franchisee stores that were performing well. Rather than just expanding, we have focused on solid foundations,” he said.

Adidas is trying to scale up its business in India and focus on being a premium player. Recently, the company applied for opening fully-owned stores in the country. “A few big stores of 5,000-6,000 sq ft will showcase the brand in a better way and offer premium experience. We are focusing a lot more on the premium section and want to take the store count from 750 to 1,000 by 2020,” Thomas said in a response to a query. He declined to comment on future targets.

Analysts say the company’s strategy of not diluting its brand image and focusing on remaining a premium player has paid off.

“From the beginning, Adidas was clear it would be a player at the right price points, and focused on the right markets. This has worked well for them,” said Pinaki Ranjan Mishra, partner and national leader (retail and consumer products practice), EY.