Home / Knowledge / News / Apparel/Garments / Adidas to beat sourcing costs hike by upping efficiency
Adidas to beat sourcing costs hike by upping efficiency
14
Dec '15
To beat expected significant increases in its underlying sourcing expenses, Adidas Group will continue to work on further increasing its production efficiencies by focusing on four levers.

“These four levers include product and materials, supply base and allocation, level loading as well as productivity improvements,” an Adidas press release said.

At an investor event at its German headquarters, the Adidas management shared details on important drivers of its long-term operational development in general and the expected margin progression in 2016 in particular.

As Adidas sources the vast majority of its products from more than 30 countries around the world, it said its sourcing costs are constantly impacted by both global and local macroeconomic trends.

Ongoing double-digit increases in labour costs in most emerging markets and higher material costs for cotton, nylon and EVA are currently putting upward pressure on future product costs.

As a result, the Group expects a significant increase in its underlying sourcing expenses by 2020 and to counterbalance this headwind, the company will continue to work on further increasing its production efficiencies.

As a globally operating company, the Group is also exposed to exchange rate fluctuations, which is a direct result of its Asian-dominated sourcing activities, which are largely denominated in US dollars, while sales are denominated in other currencies to a large extent.

As a consequence, hedging US dollars is an important part of the company's centralised currency management.

The Group has established a hedging system on a rolling basis up to 24 months in advance, under which the vast majority of the anticipated seasonal purchasing volume is hedged approximately six months prior to the start of a season.

As a result, the company has almost completed its anticipated hedging needs for 2016, expecting Group gross margin to be negatively affected by the unfavourable effects from a stronger US dollar against most major currencies.

In total, higher input costs and unfavourable foreign exchange effects are expected to significantly weigh on the Group's gross margin development in 2016.

However, the company expects to be able to compensate the vast majority of those negative effects, thus limiting the projected gross margin reduction to between 50 and 100 basis points compared to the 2015 level.

In addition to supply chain efficiencies, this will be achieved by significant price increases in several regions, adjusted trade terms with the company's retail partners, over-proportionate growth in higher-margin markets as well as a more favourable category, product and channel mix.


Must ReadView All

EU, Japan finalise Economic Partnership Agreement

Textiles | On 18th Dec 2017

EU, Japan finalise Economic Partnership Agreement

Building on the political agreement reached in principle during the...

WTO, ITC launch cotton portal to enhance transparency

Textiles | On 18th Dec 2017

WTO, ITC launch cotton portal to enhance transparency

The World Trade Organisation (WTO) and the International Trade Centre ...

India much behind China in containerised cargo capacity

Textiles | On 18th Dec 2017

India much behind China in containerised cargo capacity

India’s total containerised cargo capacity of 8.75 million...

Interviews View All

Shawn Honeycutt
Bolger & O'Hearn

‘The Indian market is interesting and rather persistent in seeking new...

Spokesperson
Hugo Boss

'Hugo Boss works with carefully selected sourcing partners'

Top executives
Textile industry

The foremost issue is bridging the skill gap

Ravindra Jain, Ashish Baid

Oswal Prints Private Limited has been manufacturing and exporting ethnic...

Nitesh Mittal

Kusumgar Corporates is a leading manufacturer of technical textiles and...

C Dhandayuthapani

MAG Solvics Private Limited was established in 1991 to design and develop...

Mark Paterson
Technical Absorbents Ltd

Mark Paterson, R&D manager of Technical Absorbents Ltd talks about Super...

Iago Castro Asensio
RCfil Distribuciones S.L.

Iago Castro Asensio, International Business Manager of RCfil...

Kevin Nelson
TissueGen

Kevin Nelson, Chief Scientific Officer, TissueGen discusses the growing...

Robert Brunner
Devereux

Golfwear and menswear brand Devereux is set for greener pastures. Robert...

Yash P. Kotak
Bombay Hemp Company

One of the directors of Bombay Hemp Company, Yash P. Kotak, speaks to...

Judy Frater
Somaiya Kala Vidya

Among the many honours showered on Frater, including Fulbright and Ford...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

December 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Planning to Take the Leap towards
Sustainability?

Do you see sustainability as a route to business growth?

Yes No

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes No

Active Poll

Do you see sustainability as a route to business growth?

Yes
68.1%
No
13.8%
Skip
18.1%

Total Votes: 94

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes No

Active Poll

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes
62.8%
No
29.8%
Skip
7.4%

Total Votes: 94

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes No

Active Poll

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes
87.2%
No
9.6%
Skip
3.2%

Total Votes: 94

Thanks for your valuable feedback. Claim your free latest sustainability e-book.

Active Poll

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes
81.9%
No
8.5%
Skip
9.6%

Total Votes: 94


E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search