Adidas India to set up own stores, cut franchise partners in revamp
Mumbai: Sportswear company Adidas India Pvt. Ltd is in preliminary talks with a few of its franchise partners to take over some of their individual stores or operations for cities like Delhi, Mumbai and Bengaluru, said a top company executive.
The India unit of German-headquartered Adidas AG had received government approval to open 100% foreign-owned stores in India a year-ago and will open its first store in Delhi by July, said Dave Thomas, managing director of Adidas’s India operation.
By 2020 the company will open 30-40 big flagship stores, said Thomas. However, as finding premium real estate is a challenge in India, the company has started talks with its existing franchises where it will look at taking over some of their large stores. “We are looking at this on a case-to-case basis hoping to find win-win solutions,” said Thomas.
In the past couple of years, Adidas, which also operates Reebok in India, has been consolidating its franchise partners and retail footprint.
In 2012 when the financial fraud rocked Reebok the company had to close 500 franchise partners working for the two brands. “Now there are 70 franchise partners and this number will further come down to 40-50,” said Thomas without specifying a time frame.
Also in the last two years since Thomas took over the India operations the company has shut more stores than it has opened. However, it is closing smaller stores and opening fewer larger stores. As such the net square feet space it operates in India has increased, said Thomas without sharing the total sq ft of space addition it has made to its retail footprint 740 stores which includes 260 stores of Reebok and 460 stores of Adidas and a few common factory outlet stores.
“The year 2015 was about clean-up, 2016 was about maintenance and from January we will open more stores than we close,” said Thomas adding that the company will be opening about three stores every week including relaunching renovated stores.
Besides cleaning up the financial mess created by Reebok, the cleanup included getting rid of its old stock with aggressive pricing and tighter buying of fresh merchandise. “In the past we took chances and ordered stocks for stores that were to open during the year. Now when in doubt we are not buying,” said Thomas alluding to the fact that there usually always is delays in opening new stores as malls don’t open as per their schedules and then the retailer is left with excess stocks.
At Reebok, the company is narrowing its losses. Net loss in financial year 2016 stood at Rs35.9 crore compared to Rs58.68 crore a year-ago. Revenues grew 6.5% to Rs354.89 crore from Rs332.99 crore.
Adidas ended the financial year 2016 with net profit increase of 10.53% to Rs61.9 crore from Rs 56 crore a year-ago. Revenue increased 11.63% to Rs 898.69 crore in financial year 2016 from Rs 805 crore a year-ago, according to the company.
According to analysts rivals Puma and Nike are biting on its heels as they are growing faster.
However, Thomas is confident that the rate of growth will improve next year. “Our average growth this year will be over 20% for the calendar year,” said Thomas adding in India we are the biggest, most profitable (sportswear company) and want to be the best and biggest brand for a long time.”