E-commerce is the 'future for a lot of markets,' Adidas CEO says
- Adidas CEO Kasper Rorsted told CNBC Wednesday the company saw e-commerce as a "tremendous opportunity."
- It came as the company published its 2018 earnings, which exceeded analysts' expectations.
- However, Adidas is expecting U.S. growth to stall in the first half of this year as it struggles to meet strong demand.
There is big opportunity in the e-commerce market, the CEO of Adidas told CNBC Wednesday.
Speaking after the announcement of its full-year results, Kasper Rorsted said e-commerce is the "future for a lot of markets."
"We launched our own app last year, and it's been downloaded more than 7 million times in more than 25 countries. We think e-commerce is still in its early days, and there's going to be a tremendous opportunity – but you have to couple it with big franchise stores or flagship stores where you can see the product," he said. "But there is no doubt e-commerce and e-commerce through a mobile environment is the future of our company," Rorsted told CNBC's "Squawk Box Europe."
Adidas saw a record-year in 2018 but Rorsted expects supply chain issues to constrain U.S. growth in the first-half of 2019.
The sportswear brand's net profit reached 108 million euros ($122 million) in 2018, surpassing analysts' expectations of 88 million euros. Fourth-quarter sales rose by 5 percent to 5.23 billion euros, also exceeding expected figures.
Rorsted further noted that the company grew its online business by 36 percent and said overall it was "by far the best year in the history of our company."
Adidas is targeting 4 billion euros in online sales by 2020 – approximately 12 percent of its business – but Rorsted said in the long-term the company expected that figure to rise to around 25 percent.
Supply chain issues
Despite 2018's success, Adidas expects supply chain issues to impact its North American sales in the first-half of this year.
"We've doubled our business in the U.S. in the last three years, and the volume expanse we've had we simply can't supply," Rorsted told CNBC. "That's why we're probably missing one to two points of growth for the company for the full-year, predominantly happening in the U.S. in the first half. It's a demand problem – we can't really deliver on the demand of the market, which is on one side a good situation but of course very annoying because we could have had an even better 2019 than we're having."
The company's biggest struggle will be meeting strong demand for its mid-priced apparel – but Rorsted said Adidas had no intention of hiking prices to offset the problem.
"Right now there is no way of mitigating it, but if you look at the overall outlook we're still looking at a 10 to 14 percent net earnings growth which is very strong, (and) taking the margin to 11.5 (percent) in 2019, which was the original target for 2020, so we're pretty much one-year ahead of our plan and our targets for 2020," he said.
"Pricing comes with innovation, if we bring new products in like the Ultraboost 19, we are capable of driving pricing in, but we pretty much stay within a framework and we have very few very high-priced products," Rorsted added.
Stalling in Europe
In its outlook for 2019, Adidas said it expects to return to growth in Europe after a slowdown in the region.
"We'll be returning to growth in Europe in 2019. We are seeing a slowdown in the European market (but) Reebok returned to profitability in 2018 – we originally targeted the profitability of Reebok in 2020, so we're very happy that we're now having Reebok back contributing to the profitability of our company," Rorsted said.
Adidas shares were down 5 percent during early trade on Wednesday.
—Reuters contributed to this report.