The adidas Group is creating a new organisational structure after the company saw a record fall in profits of 97% in the first quarter down to 5 million euros. The realignment of the business will speed up the Group’s efforts to survive the challenging market environment and emerge from the current economic downturn, which will see further job cuts at both Reebok and adidas.
“Following many months of preparation, including the implementation of a joint operating model for adidas and Reebok in virtually all regions around the world, we are now in a position to make a game-changing structural refinement to our business,” said Herbert Hainer, CEO and Chairman of adidas Group. “All initiatives we have taken or which we are now implementing are built and executed under one guiding principle: to bring the adidas Group’s brands and products closer to the consumer. The current economic climate adds urgency to accelerate our plans.”
Over the last seven months, the adidas Group has implemented a series of reviews throughout Group and brand functions. This strategic review focused on identifying and supporting key business opportunities while eliminating costs that do not contribute to the immediate business success. A key pillar of this review included a full analysis of Group structures in order to adapt them to become faster, more effective and more flexible.
While these initiatives have either been completed or are currently being implemented, the drive for effectiveness and efficiency for a sustainable, healthy business continues. Since 2000, the adidas Group has grown significantly in complexity from 95 companies to 190 represented in all regions of the world. During that period its business has evolved from predominantly wholesale to include a far more significant retail component. With over € 1.8 billion in own-retail sales in 2008, the adidas Group is on a growth path that will make it one of the top 250 global retailers in the medium term.
As a result, management began an intensive examination of the Group’s businesses in 2008, which will lead to the following organisational changes over the coming months.
Adidas will take out one complete level of management – the regional office. This means that the Group will no longer operate regional headquarters in Europe and Asia. Instead, it will strengthen the direct interaction between the global organisation and the local markets. Although the company maintains its position that no forced lay offs will take place, German media reported that at least 1000 jobs are at stake at Adidas offices in Herzogenaurach and Hong Kong.
Furthermore the wholesale part of the business, where products are sold and distributed via retail partners will be consolidated under the leadership of a Chief Sales Officer.
Herbert Hainer, CEO and Chairman of adidas Group, added: “Our Group has seen fantastic growth over the last eight years. Now, we have to look forward and prepare our company to achieve the next level of success mid- and long-term. Our new set-up takes into consideration recent, current and future market developments and focuses our organisation more squarely on our most valued stakeholder: the consumer. In doing so, we make sure that our Group navigates successfully through the challenging market conditions we face in 2009, positioning us to accelerate profitable growth once the global economy rebounds.”
Adidas said it expected its operating margin to decline, but that earnings per share were expected “to be around break-even in the first six months of 2009” before getting well back into the black later this year.
Image: Adidas logo
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