One of the world’s largest sportswear manufacturers Adidas, which temporarily closed stores in Russia in the spring of 2022, following the example of Reebok, may transfer the local division to an alternative foreign investor. This will allow relaunching about 100 of the most profitable stores in the new format. So far, Russian Adidas is supporting its activities by subleasing part of its office and warehouse space. The demand for clothes and shoes of famous brands has partially gone online, but the potential for the development of sports stores remains, experts say.
The German manufacturer of sportswear, shoes and accessories, Adidas, is considering the possibility of transferring the Russian division to a foreign investor, a Kommersant source in the retail market told Kommersant.
Three sources of Kommersant in the retail real estate market are also familiar with similar plans by Adidas.
One of Kommersant’s interlocutors says that the company can thus restart about 100 of the most profitable stores in the country.
Adidas did not provide a comment. In the Russian office, Kommersant’s calls were not answered.
The German brand Adidas, like other global companies, announced the suspension of operations in Russia and the temporary closure of retail stores in March 2022 after the outbreak of hostilities in Ukraine. In October, the company made the decision to permanently wind down its business in the country, Adidas said in a statement.
The Russian structure of Adidas is still trying to maintain activity. In the explanatory notes to the reporting of Adidas LLC dated March 20, 2023 for the last year, it is said that the company’s management minimizes the consequences of breaking the supply chains of goods.
In particular, Adidas LLC agreed on a 14% discount on the Moscow office rental for 2023. The company also subleased office space until 2026 and entered into two contracts for the sublease of warehouse space in the village of Novoselki, Moscow Region, for a period up to 2024 and 2026.
At the end of 2022, the Russian structure of Adidas rented 153 premises for stores, including the former flagship point in Moscow on Kuznetsky Most.
The revenue of Adidas LLC in 2022 decreased by 55.1%, to 24.97 billion rubles. year by year. Net loss was at the level of 7.93 billion rubles. against net profit of 3.99 billion rubles. a year earlier.
Another major manufacturer of sportswear and footwear, Reebok, followed the path of transferring the Russian business in 2022. This brand was part of the Adidas structures in 2005-2022, and then was sold to the American Authentic Brands Group (ABG).
The Russian division of Reebok was transferred to the Turkish holding FLO Retailing, which agreed on the production of brand items (see Kommersant dated May 16, 2022). As a result, Reebok stores in the Russian Federation were renamed Sneaker Box and became multi-brand.
Marina Malakhatko, Senior Director of СORE.XP, believes that it is inappropriate for Adidas to keep the lease of non-working sites, especially when the penalties for early termination of the contract exceed the cost of payments before the end of the lease.
According to the expert, in the event of the sale of the Russian division of Adidas to a third-party investor, we can expect a change in the name of the store, as well as a transition to the supply of goods through partners.
Evgenia Khakberdieva, Director of Retail Real Estate at NF Group, adds that after the cessation of brands such as Nike and Adidas in Russia, consumers began to shop more often in multi-brand stores, as well as on marketplaces. According to Avito, this spring season, sales of goods under the Adidas brand on the site have doubled compared to the spring of 2022, under the Nike brand – by 2.6 times.
According to Ms. Hakberdiyeva, when reopening, the former Adidas stores will have to compete first of all with the same Sneaker Box, as well as with Sportmaster and the Demix brand, which is part of the group. Although the potential for development remains for both existing and new sports brands, she believes. The segment of sporting goods stores has a large growth potential, Marina Malakhatko agrees.