adidas AG (ETR:ADS)
Germany · Delayed Price · Currency is EUR 143.90
+1.15 (0.81%)
Sep 14, 2026, 5:39 PM CET
← View all transcripts
Investor Day 2017
Mar 14, 2017
What a powerful start to the day, don't you think? Good morning, everybody. A warm welcome to Herzo. A warm welcome to the adidas World of Sports. Of course, also a warm welcome to all of those of you who are following our webcast around the world. I hope you're not in too much pain after yesterday's workout session. I heard that particularly the EXOS group, and some people yesterday evening were calling it the Exodus group, are not suffering too much. Jürgen, you okay this morning? Morning. Okay, that's great. You're hiding a little bit behind the camera there, but I'm glad that you're feeling okay. While Jürgen and some others might actually feel and think differently, I thought it was really great to see that so many of you already joined us yesterday afternoon for that sports activity and also the dinner event last night.
I really enjoyed being able to catch up with you in that informal atmosphere, to chat with you in a casual way over there in our laces building, which by the way, I think our events team did a great job in turning from an office building to a perfect event location. Thanks very much for that. I have to say, I also really enjoyed listening to what I thought was a very interesting and inspiring presentation from Florian Gschwandtner. Many thanks also to Florian for sharing his insights with us. Guess what? It's even more interesting and more inspirational presentations today. We are, however, not in the laces building today, but in the so-called Adi Dassler Consumer Center. I actually cannot think of a better place than this building here to host this event because this building really reminds us of our roots.
It reminds us of the mentality, the mindset, the obsession of our founder, Adi Dassler. Those of you who were here two years ago might remember what I said back then, that our new strategic business plan, Creating the New, is aimed at doing exactly what Adi always did. With a clear focus on the consumer, making a difference in their lives, pushing boundaries beyond conventions, pushing boundaries beyond the expected, and reinventing the game. I think that's exactly what Creating the New has helped us to do over the past two years. Make no mistake, no matter how much progress we've made over the past 24 months, no matter how great the product was that Adi created, he was never satisfied. He never became complacent. I can promise you, neither do we.
That's exactly why only two years into this plan, we have created an acceleration plan that we're going to share with you today. Today you're going to hear more about the progress that we've made over the past 24 months. You're going to hear what we want to achieve over the next four years, and of course, you're going to hear how we want to achieve that. For this, we have three presenters today. We'll kick it off with our CEO, Kasper Rorsted, in a minute. Kasper will be followed by Eric Liedtke, our Executive Board Member, Global Brands. After a short coffee break, we will have our CFO, Robin Stalker, walk you through the details of our new 2020 financial ambition. Afterwards, we will of course have enough questions to answer.
I don't want to say all of your questions because I'm in charge of managing expectations here. I'm going to say most of your questions and all of the remaining ones we will of course, be happy to answer afterwards, either from the IR team or on the road shows that we're going to be on over the next couple of weeks. We have a hard stop at 12:45 because there's actually quite a large group of you that needs to be in the bus off to the airport at 1:00 in order to catch your flights back home. While I understand that there are some issues with the flights to the East Coast in the U.S. due to some difficult weather conditions over there, at least we, from our side, want to do whatever we can to make sure that you get back home safely.
I guess we don't have any time to lose, and we better get started. Let's kick off the adidas Investor Day 2017. We are obsessed
Good morning, everybody, and welcome to Herzo. I know many of you from my previous past, and most of the interactions we've had, I've enjoyed, not all, probably mutual. I really want to thank you for coming here and spending yesterday with us, yesterday afternoon, and of course today, where we're going to give you an insight in where are we in the execution of our Creating the New strategy. Before we go so far, I do want to speak about something that we announced last week, which is, the succession at first of the retirement of Robin, who's been with the company for 20 years, CFO for 17 years, and done a remarkable job. Thank you to Robin for doing an outstanding job. He will remain our CFO until the 11th of May, where we have our AGM.
He is our legal CFO and also our operational CFO until then. During that period of time, we'll have a handover period, which is very similar to the one that Herbert and I had with Harm [Foreign language], who's been with the company also for many, many years. His last responsibility was e-com, and he will be part of the management team as of last week. On the 12th of May, he will be our CFO. Both are here today. Of course, Robin is the one with the mic today, so to speak, and Harm will be the guy with the mic as of May 12th.
I do want to just make sure that I speak about that, and I hope that many of you also get the opportunity to, over the next couple of weeks and months, say goodbye to Robin, who you all know very well after many, many years on the road with him. We have the power to change lives. Some of you also experienced that yesterday when you went to our gym. It is a unique position to be in that we actually have a really good reason to be here. That reason resonates with our consumers, it resonates with a lot of our stakeholders. I can also tell you it resonates a lot with our employees because when young people today look for a job, they have a lot of opportunities, and the best have tons of opportunities.
You got to have a reason why they should join our company. We receive more than 1 million applications a year, we have a vast volume of people that we can look upon and of course, quote-unquote, "assets" we can bring to our company. For the best, there's huge competition. Having a reason to be makes a difference when you're recruiting. Also having a reason to be as a company is for us an important part. I think you heard Sebastian speak about our roots and origin. That's who we are, that makes us different, and we're proud of it. For us, it's important that we understand whom we are and whom we want to preserve also to be in the future.
We also have a mission, you can say a lot of companies have a mission, but I do think as the CEO of a company, a mission is enormously important because it is the compass that drive the direction. It's also the statement that articulates the long-term ambition that you have and which should also determine your level of satisfaction when you execute. We want to be the best sports company in the world. It doesn't necessarily mean to be the biggest, but it means to be the best. Eric will speak a bit about what best means in many ways from our brains standpoint. From a company standpoint, it means that we look upon and benchmark ourself and say, "Are we the best?
Where will we compare ourself to?" Then we can look upon and say, "How do we actually get a plan in place to become the best?" From a shareholder standpoint is providing the best or very competitive return to our shareholders. That's why you're here today, because I hope you believe that we have a very good compelling investment story in the short and in the long term. For us, this is an extremely important statement because it does set the bar for what we're trying to do, and you can't really be the best if you're mediocre.
We are in a very attractive industry, and I think we have to look upon that all the time and also really understand the drivers of our industry and understand what are actually the opportunities and compare ourselves to the right peers when we look upon the bar and look upon how do we actually define what good look like. We're an industry with very sound economics. As you can see, last year, the European economy grew around 2% GDP-wise, and we grew approximately 20%. Very attractive industry. There are healthy profit margins. You can then argue, are we getting enough out of the opportunity end to end? There's a solid growth, as we said, and we believe we provide very competitive long-term shareholder value. You've seen that in the past, and we'll try to articulate how we view the world to a 2020 window.
Of course, the world goes on 2020. However, it's important that we take step by step and build a foundation to ensure also beyond 2020. 2020 is what we have in mind at this stage. The growth opportunities are huge. It's a sport and a culture world. Digital will be the game changer in our industry like it is in many industries. You can't see any young person move around without having his or her device in her hand. I was having a conversation yesterday with a person that does corporate strategy, and I used the term PC, and he looked at me, he's 32 years old, and he laughed at me and said, "I can't remember when somebody last used the terminology PC to me." The world has completely changed, but you're also seeing the impact of health and fitness overall in people's lifestyle.
Of course, this is for us in a very attractive part, and I'm certain Florian last night also touched upon the convergence of those two areas. We have a great strategy, and I do want to repeat what I said last week because I think it's important. As an incoming CEO, you should change strategy if there's a reason to, and you should not if there's not. We don't have a reason to change the strategy. I think this is an important part, that if you expect a new strategy, it's not coming. I said that already in November. We have a great strategy. We don't need more strategy, we need more execution. We need to make certain that we stay extremely focused on what we said we're going to do and diligently execute what we're saying we're going to do.
Some of the conversations you're going to have with us in the future might have two different characters. When it comes to the creation, you will see a very exciting, very compelling story for us. You might say in two years' time, it's getting boring to speak to you because you would continue to repeat the same. That would be very deliberate because if you have a strategy has only value if you take and then execute what you're saying you're going to do. Of course, we are going to hold us accountable for what we're saying to you. When we say or state elements around our strategy, we mean them, and we will diligently execute around them. That means, of course, also that we'll go back from a KPI standpoint and hold ourself accountable to what we told you and speak about that.
Three and a half years can be long, but we believe that that's how you build a foundation for creating exceptionally good company or the best company in the world. We've made a lot of progress in our strategy, and maybe I'll go one point back. I assume that you're all aware of what we're trying to do, I'm not going to repeat that. Of course, it's taken its origin in creating brand desire and monetizing around that brand desire that we're creating with the consumer. It's driven by a number of choices, speed, cities, and also open source. For me, the most important one, by far the most important one, is having the right culture in our company that ensures that the company will become long-term successful. Through culture, you create competitive advantage. That's where companies over time differentiate themselves.
That's where you win or that's where you lose. The cultural aspect of our strategy is the core of whom we are. Of course, the outcome is very simple. We want to make certain that we drive top-line growth and market share growth at the same time. We expand our gross margin, and we get leverage into the model, we start building a scalable model that will drive operating leverage to ensure that we become a better company as time goes on. We have, in the last 18-24 months, made a lot of progress in our strategy. At the same time, we have a very long way to go.
When I look upon, and I'll mention a couple of items here and we'll speak about them probably later on, is when it comes to speed, among others, what we are of course trying to aim for is full price sell-through. Ensuring that more and more of our products will be sold at the price tag in the store and don't go to promotion. A lot of that is helped by our speed-enabled products, we can do in-season creation and in-season delivery to ensure that we don't do bulk deliveries in the beginning of the season either by default always have under-forecasted or over-forecasted. When it comes to the key cities, we defined 6 key cities for us initially, London and Paris, New York and Los Angeles, Tokyo and Shanghai. Of course, the idea behind those 6 key cities are they are global trendsetters.
That's where the trends are being shaped worldwide, where young kids or people my age start looking upon and say which trend lines are coming out and what's happening from a sporting standpoint and of course, also from a trend and design standpoint. What we've seen is that from an NPS, Net Promoter Score, we are outperforming our overall company. In the cities where we have a special focus, we have overproportional growth, we have overproportional market share, and we have overproportional NPS. We know by default that what happens in those cities sets the trends for what's happening in the market. It brings me really back to the point of digitization, living without borders, and that is exactly what is happening in those cities. What happens in New York, young kids know today in Herzogenaurach. What happens in Berlin, they know here.
What happens in Paris, they know here. If you're not controlling the space that sets the direction, you're actually not controlling your own destiny. When it comes to open source, it's new innovation looking upon Futurecraft and other sustainability initiatives, but also commercializing around what we're doing, making certain that the innovation that we bring in has a strong contribution to our brand, but eventually also to the bottom line. It is not an either/or scenario. We're not only happy if it's only brand, but of course, we're not only happy if it's only bottom line. We got to find the right balance and ensure we get the external "creators" to help us bring the right products to our consumers and make certain that the consumers are happy with what they see. We need to make certain we're a consumer-obsessed company.
One of the areas which I feel extremely strongly about, and I want to thank Eric and his team for this, is our efforts in sustainability. We are convinced this is a key differentiator for us as a company. We do not only have the opportunity to do it right, we have the obligation to do it right. Whether it's with Better Cotton, where we said that we want to make certain that we source at least 6% of our cotton through certified cotton manufacturers, and we do 68% today, whether it's around our entire Parley activation. Those of you who have not followed, we did go out and launch our first shoes last year. We did go out and also ensure that some of our key football franchises or soccer franchises was actually using it, and they got more clicks than anything else.
When you speak about brand activation, Parley is a unique opportunity to do so. Lastly, of course, ensure that our end-to-end supply chain complies with the standards we set ourselves. This isn't an opportunity for us, it's an obligation, and I think we're a unique company because I don't know any other company that actually turns garbage into products. When we opened our New York store, the top-selling shoe in the month of December was a Parley shoe, the top-selling shoe in the store. This is what young consumers or many consumers want, and we need to make sure that we do the right thing, but we also turn the right thing into a commercial asset for us, and I think we're well on the way to do so.
This also requires courage and also setting long-term targets to make certain that we actually set our supply chain up to allow that to happen. When we look upon NPS, Net Promoter Score, why is it so important? We believe it's so important because it's the best indicator of actually tracking whether we're doing the right thing for the consumer. Today, every single individual in this company are measured on NPS, the management team and the rest of the organization. What we've seen in the past year is that we dramatically improved our absolute performance. Overall, the absolute, but we also improved our relative performance versus the competitor. We're looking upon both. Are we in the different markets improving absolute, and are we closing the gap to our competition?
Of course, you have different scores in different markets, but what is not different is where are you when it comes to closing the gap. This is a target that will also accompany us for the next, at least until 2020. What happens after then, we will speak about after then, but this is an indicator of how competitive are we in the market, how much confidence and how much buy-in from our consumers have we created in the way we bring products and solutions to market. We had a very strong year, I would say an exceptional year, 18% growth compared to the previous year in currency neutral terms, and we took our net income up by 41%. A huge step in the right direction.
The one concern I have with this number is that if we do not watch out, this can also lead to complacency within a company, and complacency is the first step to start believing you are great. We are very proud of this number. We also need to look upon in which context is it coming from? What was the starting point? Where do we want to go? We have celebrated the number internally, which we should, but it is all yesterday. It is all in 2016, and we cannot pay any bills in 2017 for what we did in 2016. We are happy with where we are, of course, we still have a long way to go. It was a great year. It was in many ways an exceptional year, but it also shows the opportunity in our company, and I think that is an important part.
It shows how much opportunity we actually have in the industry we operate within when we do things right. If we look upon and say, "What are we expecting in 2017?" We are expecting a growth rate in currency neutral terms between 11% and 13%, an operating margin to go from up by approximately 60 basis points to a level of 8.3%-8.5%, and a net income increase at a rate between 18% and 20%. When we look upon how we manage the company, the most important indicator for internally is our EPS growth or net earnings growth, because that is where we need to get the balance right between ensuring top line is growing ahead of the market so we gain market share, of course, also getting scaling back into our model so we get scale effects out. We are a EUR 19 billion company. We have to get scale out.
That is paramount for the long-term success of our company. Scale without top line brings us nowhere. We could easily optimize and get the margin up by start cutting the investments that are necessary for the future. That is not what we are aiming to do, and that is why having a long-term strategy is so fundamental for a company because it does drive the direction of what you do today. I say it differently, if we do not do the right things in 2017, we will not get the benefits in 2019. It is not very difficult, but a lot of companies actually do not do that.
We want to hold us accountable to you for what we're going to do in 2017, and within the envelope of 2017, ensure we make the right investment decisions or structural decisions that allow us to get to where we need to get to in 2019 and 2020. Of course, also recognizing in this forum that while we have no targets beyond 2020, life goes on, I hope, beyond 2020. Unless we do the right things in 2018 and 2019, we will actually not have the right plan in place when we eventually will speak to you in 2020, where 2025 or 2024 will take us. Getting that balance right, the short-term guidance of ensuring that we become better every day, and the long-term guidance that we know exactly that better every day means better in four years' time.
There is no long term without the short term. I learned that from my predecessor at Henkel. If you push everything to the long term, you'll never get there. This is a chart that some of you have seen, at least you read about it, because when we created Creating the New, or when we announced Creating the New, we thought about we could take the company to become a EUR 22 billion company. It's a huge step in the right direction. Fortunately, that we have made great progress in the last two years. We came out at EUR 19.3 billion in 2016, and if you do what I call guerrilla mathematics, and then pending on some currency fluctuations, you'll get to around a EUR 21 billion number this year.
That means getting to EUR 22 billion is going to be very difficult, or we have to do something extraordinary that you will not reward us for. When we look upon that, it's actually a huge opportunity we have. We came much quicker out of the starting block than we anticipated. We need to make certain we actually use that starting speed that we have and bring it on. For clarification purposes, we never went back and said every step is the same from 2015 to 2020. We never did that, and that the same we're saying now. We will have bumps in the roads. There'll be years where we'll have outstanding performance, and there are years that we'll have less outstanding performance, because there is no complete straight line to get where you need to get to.
While we got out of the starting blocks very quickly, I do want to remind everybody that the beginning was 2014, which was one of the worst years in the history of our company. Of course, in relative terms, the first couple of years, you will relatively see more improvement than you see in the rest of the years. As you can see, we added approximately EUR 2 billion plus to the top line in between 2015 and 2016. Right now, between 2016 and 2017, we're contemplating adding another EUR 2 billion on top line. In EUR, depending on the currency rate, that's a half an Under Armour, just to put in context. That's what we're talking about adding on the top line every year at this stage. We look upon the company, we actually believe we have great potential.
Great potential, I think, comes out of you have a foundation that is good, but you're also aware of that there are opportunities or areas where you can be much better. Let me just speak a bit about where I believe we have some unique strength in our company. I hope you've felt it over the last day or so when you've been here, we're a passion-driven company. We have great people. They live for this company. They come in every day. They want to be here. They don't come in because they have to have a job. They want to be at this company. They have an emotional tie into what we do, what we're trying to do as an organization, and they really want to be here for the long term. We have very strong market organizations.
We have grown up in a very decentralized way, which gives them different challenges, but we have exceptionally good leaders in our countries. Whether it's in Asia or Russia or the U.S. or Europe, we have exceptionally strong people in our countries. We have very distinctive brands with the two we have or the two we'll end up with. We have great innovation, Eric will speak about this. Fantastic consumer focus or consumer obsession, we have a very high growth momentum. We have a lot of things speaking for us. At the same time, I think it's also important that we open the kimono, so to speak, and speak about what can we do better as a company. Where are the areas that we actually will make certain that we continue to improve the company we're operating for?
We're very poor when it comes to diversity of females. In our top 300 people in our organization, we have 17% female. Unacceptable. We've never done anything about it, a statement I've learned from my father many years ago, it takes a very long time to finish something you're not really working on. We've not done a good job on this. We've done a great job on the passport. What I mean by that, we are a very global organization. We might have our roots in a small village here in Franken, but we're a very global organization. We've done a great job on the passport. Digital, you'll see many areas we're saying we're doing a great job, but this is where the opportunity is. We have one big advantage that very few companies have. The number is 30. That's the average age of our company.
That means we have a lot of young people that understand digital. I think you met Florian last night. Great guy. Digital, while we're making progress, is by far not where we want it to be or where it can go. I spoke about the great people we have in the countries, because that's the origin of whom we are, but it also means that we have not done a very good job of end-to-end structures. Because we come from a different origin. We come from an optimized country model instead of an optimized global model. With Creating the New, we are in the process of making that swing, but our structures are optimized to a decentralized model, we're right now moving to a centralized model. Execution and rewarding performance.
What I mean by that, I mean that in certain years, we do exceptionally well, like we did last year. We should celebrate, we should pay. When we don't do well, we should not celebrate, and we should not pay. We need to have a more outspoken opinion about what performance looks like and make certain we over-reward good and under-reward bad. We say we're a performance-driven company. We are in many ways because we come from the sporting goods industry, but making the hard call at the end of the day, we have more opportunities. The best person in our company is our lowest paid person. Price-performance of our best person is the lowest. Price-performance of our worst person is the highest. Making certain that we really understand who are our key people, who makes the difference in our organization. Make profitability a higher priority.
This is one of the areas where we've struggled. We have put focus historically on growth, on brand, but really looking upon and seeing how do we bring profitability up, not as a contradiction. It's not an either/or. If you look upon it, and you know this better than I, most leading companies in the world, the biggest companies have the highest profitability. There is no discrepancy in there. That's where we need to become better. Streamline our portfolio, which I'll also speak about. In a very simplistic manner, this is our financial opportunity and our financial challenge. This is how the company looks over the last eight years. Great growth, no scaling. That is a very simplistic way of articulating the challenge.
I can tell you, we would much rather have one where you have great growth and no margin improvement, instead of one where you had no margin improvement and no growth. If you have the growth, you have the capability to drive scale into your model. This is, in essence, how we look upon and say, how do we take Creating the New and preserve everything that we communicated, but address this problem? Preserve left and work on the right-hand side, in connection with left, not in contradiction with the left-hand side. I think that is what a lot of companies actually, or a lot of investors expect. We expect it ourselves also, because if we don't do that, we're actually not getting the benefit of whom we are. We move from being 20 small companies, which are decentralized entities, to become a global organization.
That move has started. It started a while ago, a long time ago, but particularly with Creating the New, we accelerated that move. That is, in essence, the challenge we have. You know it better than I. You know the numbers probably by heart, and I assume that's why you also invested in our company. Where are we coming from and where are we looking upon it? We're looking upon this in the context of the 2020 plan from its origin. I want to make certain that I say that so I don't create any confusion. That is how we look upon it. We will consistently look upon what is the original guidance for the period, and every year, of course, give you an annual guidance. We don't do a, quote-unquote, "change" every year.
Now there's four years left, now there's three years left, now there's 2 years left. Of course, we are looking upon and redoing it now for very basic reasons, which I showed you, that we are going to end up at 21+. If we had a target of 22, that would be completely unacceptable to reach. Originally, we guided on the top line of high single digits, now we're saying 10%-12% for the period. Originally, we guided EPS growth of 15% approximately. Now we're guiding 20-22. On the sales side, the implied, we're using implied here because there's currency fluctuations. We originally guided 22, now we're guiding between 25 and 27, the 25-27 are excluding TaylorMade and CCM. We're taking that out. We guided EUR 2 billion in e-com, now we're guiding EUR 4 billion in e-com.
The implied operating margin was 9.9% in the previous guidance, now we're guiding 11%. I do want to stress the following to be consistent with the way we look upon the company. The two primary KPIs are top line growth 10%-12%, and EPS 20%-22%. I've been very clear about the scaling in the model, we will drive scaling into the model, these are the two KPIs. If we come out at 10.8% or 11.2%, it might be. There might be good reasons for being low or high, it is the 20%-22% we're guiding for. If you look upon it, we can't get to the 20%-22% without getting the margin up.
Don't get me wrong, it is an important part for us, I'm just saying for consistency in the way we look upon our company, it's in the same context as the original guidance of our Creating the New. Last night, I had a very good conversation with many of you, some of you came and asked, "What if there's more than 11%? Where are you going to take it?" Where are we going to take it? Look upon this chart because I think this expresses humble pie, at least to us, in a very articulate way. We're approximately 26% on the way when it comes to net sales. We're 27% on the way from where we started to where we get to when it comes to operating margin. E-com, we're 12% towards our target.
In a marathon, that means in translated terms, we've been running approximately 6 miles by now. There's a long way ahead of us, we need to make certain that we don't start thinking about something after 2020. There's no point in thinking about the second marathon if you don't finish the first. You're not going to hear any upside from us in the next 2 years. We need to make certain that we are executing upon what we set. When we get to a point where things look different like they did today, we will notify you. Right now, we're in the beginning of the race, we're not at the end of the race. I think it'll be extremely important for us as a company that we don't get distracted.
We need to make certain we execute upon the Creating the New strategy and make certain that we hit the numbers we have put ourself out to. If you're asking for guidance beyond that, you won't get it. This is what we're striving to do. This is what we're committed to do, and we'll do our utmost to get this done because that is what we're saying we're going to do. We look upon Creating the New, that is the foundation for everything we're doing at this stage. That drives the different initiatives. That's where we're looking upon and say, "What can we do better on?" We looked upon it because of the head start we had and said, "Are there areas that we can accelerate? Are there areas that we can do better on?" In any company, there's always areas you can do better on.
Irrespective if we hit all our targets in any given year, there's always areas that we can do better on. Of course, we looked upon that as a management team over the last 3 to 4 months and looked into and said, "What can we actually do better on?" One of the areas which I spoke about is the culture. That drives the entire company moving forward, and we need to make certain that we see that as the most important part. I spoke about our people which are passionate for our brands, and we actually have the best asset portfolio that we can have when it comes to people. It's getting the most out of the people we have, and that is our responsibility. Taking that responsibility exceptionally serious and ensuring that we apply them in the right place.
We believe there's a couple elements that are fundamental. Be clear on who are the key people in our company. By Christmas, we announced our top 20 in our company. By the end of this month, we'll announce the next level, so we have our top 150 people nominated and also being visible in our company and transparent. This is the portfolio of people that will drive the company forward. It's not going to be a static set up. We'll have people coming in, we'll have people coming out of this portfolio, but being clear on who is the team that will ensure that this will take place. First step was taken in December. Next step will be announced this month. We finalized the list of people after long and very constructive debates and conversation to ensure that we have the right level of competence in our organization.
Having the right team in place, and as I said, a team over four years, like any sports, it will evolve, it will develop, we'll have people join, and we'll have people sitting on the bench. That's how sport is. Secondly is to ensure that there's close alignment between what we are telling you we are striving to do or what the outcome is, what we're trying to do, and how we reward our people internally. Tying our top people to the long-term KPI of our company. I said before, the key KPI of our company is EPS, because we believe it's the best singular KPI to drive value creation within a company, particularly when you are in a non-acquiring mode as a company. All of our top 300 people in our company will have an LTI model, which is linked to the share price.
Of course, there's a holding period. It is a stock-based program. It is virtual stock, to be clear, because we have tax issues in many countries if you go into normal stock programs, but it's virtual based, and it's based on a three-year rolling model that most of you would know, with vesting in year four and year five and year six. This is how we're going to do it, because we believe getting the success of the company tied to how we reward our people is key. The better we do, the more money is there, by the way, also for you. You will then ask, will we have a similar program for the management board? As you know, under good corporate governance, we cannot approve our own compensation structure. You'll be part of the approval process.
Of course, the thinking is completely the same. We did not want to wait for AGM approval for us to put this program in place because frankly, this is fundamental. Thirdly is being clear on who are the people that will drive the long-term success of our company. Who's the replacement for our leaders in Asia? Who are the replacement or complementation to our leaders in America, in Herzo? Having a very strict talent management program that looks upon the key talents and pull them through the organization so we ensure that we have internal succession planning, that when Robin leaves, we have an internal candidate. That is fundamental for the success of our company. With 60,000 people, we should not go external.
We might hire external key competencies, but for many key management positions where we know when a leader is going, there is no excuse for not having the right talent developed to succeed him or her. Lastly, as I said, on the diversity side, this is an industry that has not excelled in that. That's not an excuse. We cannot justify our failure by the failure of others. We need to make certain that we fix this, but do it in a sustainable way and build a balanced organization that actually becomes a mirror of the market we sell into. We looked upon then and say, how do we accelerate what we do? Not how do we move away from the strategy, but how do we get very focused on acceleration or Creating the New?
We looked upon four elements we believe belongs to Creating the New and is accelerating what we're doing. The portfolio, North America, scaling, which we call One adidas, Robin will also speak about that, then the entire digital environment. How do we make this a digital enterprise? How do we get competitive advantages out of applying new technologies? Let me start out by speaking conceptually about the portfolio. You saw the first example in November. The short message is every entity has to contribute to the success of the company. We cannot allow any legal entity or any brand or any market to long term be negative when it comes to profit contribution. It's unacceptable. I want to be clear.
It does not mean that we don't invest into a market where over a given period of time are occurring a loss to create a sustainable position. We have to make certain that on the long term, every member has to contribute. Not every member will contribute the same because markets are different, our position is different, our portfolio is different. We have to make certain that we have entities across the globe, however you define them, that will all contribute to the success of our company. If they don't, then we put plans in place. We have a plan in place for Reebok. We have other entities that we're addressing.
We'll consistently do that because this is how we believe you need to make certain that the good part of the company is not being dragged down by the lack of performance in other areas of our company. Which make us look upon our portfolio. This portfolio consists of approximately EUR 3 billion of business. We start on the left-hand side, TaylorMade. We've announced we're selling this asset. It's taken longer than we anticipated, but at the same time, we want to make sure we make a good transaction. It is isolated, so it's not impacting our business. We are selling TaylorMade. We announced last week that we'll be divesting our hockey portfolio, which is headquartered out of Montreal in Canada, CCM. It's non-core to whom we are. Conceptually, a very similar strategic rationale as with TaylorMade, and that was announced last week. That will be sold.
We have a outdoor climbing brand, Five Ten. We will close, quote unquote, the setup as we have it, and we'll reintegrate or we'll integrate that brand into our outdoor business, so it becomes a sub-brand, quote unquote, like a Stan Smith, but within outdoor. adidas Golf that belongs to TaylorMade will reintegrate back into adidas and separate the two companies completely, so they have nothing to do with each other. Then we have Reebok, which we spoke about already in November. Over a longer period of time, the performance has been dissatisfactory, and we put a very strict plan in place where we have KPIs that we hold the team accountable for. We're all in the same boat, so let me be very clear on this.
We are convinced that we can create a lot more value out of Reebok, but this is also going to be a longer play, we know where we're going to go. We have quarterly meetings, we have monthly meetings, I'm certain that we'll make the progress that we need to make. If we had great progress to report today, I think we would have managed it exceptionally poor in the past. Does that mean that we've completely neglected it? We know what we're trying to do, it will take time. This is EUR 3 billion out of the EUR 19 billion.
When you look upon our company and say the EUR 19.3, this is a EUR 3 billion construction site we have where we believe that we can actually create quite a lot of value in the EUR 3 billion, and we need to make sure that the EUR 3 billion doesn't have a negative impact on the EUR 16. Get focused on the EUR 16 to ensure that we have the momentum, which is high growth and attractive profitability, and going into each of those areas and fixing them one by one by one. Of course, you can then, which we didn't put on, there might be other areas. This is how we look upon it. We take it one by one and fix it. When we look upon the marketplace, it's interesting to see the conversion. It is a consumer-driven marketplace. It's a battle for share of attention and wallet.
How do we engage with consumers and how do we make sure that we get the right size of the wallet driven by digital, whether it's e-com or the entire communication part? Doesn't really matter. That is where the entire engagement is taking place, and the demand for customization, speed, and sustainability is high. If you send something, you engage, you expect immediate response. More and more consumers also expect personalized response or personalized product. Sustainability is the key differentiator. We saw that commercially in New York in the month of December. Extremely, that's where consumers vote with their money. We're also seeing channels consolidating. You're seeing the development of the malls in the U.S., at the same time, we're seeing our largest accounts that was before local or regional becoming global.
We're seeing e-commerce and digital enabling and also accelerating this trend, whether it's directly from them or from us, this is completely changing the industry. We're seeing new retailing formats and business models. Click and collect is one of them. We're seeing a market that's changing, we're seeing the consumer in the driving seat, the companies that are not consumer obsessed cannot be successful in this marketplace. We're living in a world where you got to, quote unquote, make certain that you get the best out of the past, move to the future. You got to cannibalize your own, I would say, I'm not saying existing, you're going to cannibalize what you were without cannibalizing it too quickly because that's paying the bills and migrating to the new. Getting that right balance is important.
A couple of you were asking me yesterday, what did some of your larger partners think about the e-com target? Actually, it's not the large partners that are the challenge. The large partners, we will tie into our e-commerce infrastructure. We'll tie them in to the closed loop. It is the small shops around the corner that is being challenged. Think it through like you do in the electronic shop. The small electronic shop doesn't exist anymore, the larger one do. How do we make sure that we get those around? The larger ones are fine with this because they're doing the same. Go to a Foot Locker, go to a Dick's, go to a JD, look upon their website. They're driving the same direction. It is how do we actually cooperate in that world instead of compete.
One of our most exciting partners is a German one, Zalando, pure play e-com. You can argue we should be head-to-head competition. It's one of our best partners. The partnership model is essential in this model. When we look upon it's getting the balance right. I spoke about migrating from legacy to tomorrow, but it's also getting the entire coverage of the market right. It's about premium presentation on one side, controlling our destiny without owning the entire retailers because we don't want to do that. We have great partners, but we got to make money. Just having premium destinations or presentations doesn't bring us anything because we got to get the balance of this market right.
That is, of course, why when we look upon it, when we go out and give indications where we're going to take number of stores, it is an indication because that indication depends on the brand heat that we have, but also through transformation in the marketplace. We have also clear roles for each of our markets. I'm not going to go through each of them, but it's conceptually the same as I said before, where we said each member has to make a contribution to the success of our company. We have different starting points and different challenges in different markets. Of course, where we're leaders, we have to protect and grow, and where we're not, we need to aggressively find a way in to build an attractive and a sustainable position in those markets. We look upon it in the context of grow, lead, and extend.
Of course, have defined different challenges or different targets for each of the different markets because they are different. We're a global company, but our position are very different in the different markets. If you look upon, we have conceptually the same. We're looking upon and saying we need to be exceptionally focused when it comes to categories. I spoke about key cities. I will speak about e-com and top account and key doors. The top accounts and the key doors are regional global. We need to make certain that we have a very strong relationship with those because these are key routes to market. That's where the consumer go. We need to make certain that when we know what we're gonna do, we know how we're doing it.
A premium POS experience, so the consumer comes in and understands, I'm seeing adidas, I'm seeing this is the way we place products, this is how we position them. That we get the space productivity up, that we just don't have space for the sake of space. We look upon new marketplace capacities. Are there different ways we can go to market? Do we have the right capacity in a given market, or do we need to change it? We have the right focus, and we have a systematic approach of how to go to market, despite that we have different stages in the markets that we're in. Let me just give you a couple of examples. In China, we need to take and dramatically expand our brand-led retail. We've spoken about this before, but this will grow up with effects of 3-4.
Dramatically grow our brand that retail in China and make certain our branded e-commerce with our key partners, Baidu, et cetera, become better and better. It's a very specific challenge we have in China. In Western Europe, ensure that we invest in key doors so we get the right brand exposure and POS experience, and we implement our omnichannel capacity and capabilities. We do a closed loop that we can lock down the experience that consumer has when he or she goes online with us or with some of our key partners. Two key markets for us, two markets where we have leadership positions, but two different set of challenges that we have. Now let me get to North America. Historically, probably the biggest challenge. Looking forward, probably the biggest opportunity for us.
How do we build a sustainable position that will create value for our company in the many years to come? We've done an exceptionally good job in the last two years, and we're very unhappy with where we are. I'm sure you've heard this sentence before, but that's really the essence. We are the fastest growing brand in the U.S. There are many things we did right in the last two years, but we need to always understand what is the starting position in the U.S. The starting position is that if you look upon the charts where we speak about challenges and opportunities, for 10 to 15 years, we did not make sustainable progress in the U.S. We had good years, we had bad years, we had inconsistent years. We were unclear where we want to take the company.
That changed approximately two and a half years ago. While revenue growth with 24% is great or adidas with 30% is outstanding and we are outgrowing the market, and you can also see how the growth is coming. It's coming from 80% growth in Originals, 40% in running and 25% in U.S. sports. The percentages, of course, is also a reflection of what the starting position is. It's easier to have a high percentage growth when you have a low starting position. Great year in the U.S., you can look upon in our annual report, but you can also see the things that we need to do very different in the U.S. What we should not do is try to get to a very quick resolution of our situation in the U.S.
If you take our single biggest competitor in the world, 90% of the delta we have with that single biggest competitor resides in the U.S. market. 90%. Crudely, they're 50% bigger than us. Of the 50%, 40%-45% of the 50 are U.S. That's why we're not in a short-term race here, we're in a long-term race. We need to make certain that we build a right position in the U.S. that will allow us to be globally competitive long term. If you look upon the U.S., it's win in the locker room, get the authenticity back. It's product franchise management, make certain that we don't run out of steam one franchise without having built the successor. Eric will speak about how we actually manage that within our overall portfolio, which is equally relevant to the U.S.
Ensuring that in the key city of the U.S., we have the right presence. When you go to a Foot Locker, you see it. When you go to a Dick's Sporting Goods today, you don't see it. Even though we again, making great progress with Dick's, we're still not where we need to be. We're in catch-up mode. That, of course, we need to be aware of all the time then we celebrate success. Compared to last year, great. Not to where we want to go. Wholesale partnerships, that the Dick's, the Finish Lines, the Foot Lockers, that we are positioned correctly with our key partners. Then build the digital and omnichannel ecosystem. That we build the right infrastructure, we can deliver the right product to the consumer at the right time and be very systematic. Look upon trade zone attacks.
When you go into a store in a street in a big city, you don't see exactly the same in 15 different stores in the same city. Elevate our direct-to-consumer experience and invest in branded space. U.S. is for us is still an investment area. We should not try to short-term squeeze profit out of the U.S. What you'll see is we increase the profit in 2016 over 2015. We'll increase the profit 2017 over 2016. You can also see we're guiding double-digit growth in the U.S. We got to get the right balance in place to get out of the U.S. what we need to get out of.
We believe that coming from approximately EUR 2.9 billion, if you look upon our annual report last year from the adidas brand in the U.S., we should be able to take that beyond EUR 5 billion in the next three and a half years. A lot of growth ahead of us, but a lot of infrastructure to be built. Infrastructure physically, but also, I would say emotionally, that people actually migrate to our brand, like done in many, many countries around the world. Now I'll speak about digital because I know that Robin will speak about One adidas. One adidas, to say, is building a scaled enterprise, making certain that when we add a EUR to the top of the line or EUR to the top of the line, we don't add a EUR to the OpEx line.
Digital, I've spoken many times about, today digital, I say it always the same, is hosted by Eric. I say hosted because organization is sitting with Eric, but this is a company-wide responsibility. If we don't get this right, we will not be successful long-term as a company, we believe it fits very well into our culture and who we want to be. Through sports, we have the power to change lives. To change lives, we have to create direct relationship with the consumers, the best way to accelerate building direct relationships is through digital. That's how we look upon it. Digital is the vehicle to engage with our consumers. We look upon it in three different ecosystems. We're looking upon it from a brand and commerce standpoint, from a mobile communication standpoint, and a creation standpoint.
I'll speak briefly about two of them because Eric will speak about the third. Let me speak about this. You heard Runtastic yesterday. You heard how Florian spoke about it, and I'm certain he also went in, looked upon, and said the 30-day delivery. Execution is key in this space. It's a different culture that most companies are coming from. Having a Runtastic is a tremendous asset for us, not only because they bring more than 100 million active users to us that we need to capitalize on, but the cultural way of how they actually work, how they view speed, how they look upon delivery, how they look upon deadlines, we can learn a lot about. It's not only leveraging expertise and technology, it's understanding culture. The value in Runtastic is not the integration into adidas.
It is understanding this, leveraging expertise and technology, and convert user base. That is what the value for Runtastic is for us. That's why we also keeping it, quote-unquote, "separate," but of course, at the same time, learning from them. Consumers are the starting point of what we do, and that was why Creating the New is so important because that started articulating that we are a consumer-obsessed organization. That, of course, also drives the way we think about digital. We need to make certain that in order to win with the consumer, that we have a premium position with them. Everything is mobile, everything we think about. Every time we create anything, whether it's a product, a description, a video, whatever it is, it always starts with a mobile.
Even when you want to apply to our company, everything has to be mobile, and it actually is personalized. We completely drive the consumer obsession into everything we do, whatever we do with the consumer, and we believe that creates huge opportunity for us. It creates opportunity in the absolute number that we can actually reach when it comes to revenue. We're coming from EUR 1 billion in 2016, starting out by EUR 600 million, driven by Harm's team since 2010, where it was pretty much zero. We believe we can get to EUR 4 billion. There's of course more elements. There is when we drive a high revenue number, we drive a high consumer number. That means we engage directly with the consumer. We know how he or she acts, and we actually create the right products and make the brand relevant to those consumer, one.
Secondly, we get, by doing so, a different scaling into our model. There's no doubt that building the right digital infrastructure, we get a very different scaling in, and it helps in our profitability. Looking upon profitability by channel, this is one that has extremely high importance for us because of the consumer insights, but also because that we get a better return for how we actually and when we sell our products. When we go out and say, "How do we get to that number?" Of course, you got to have a certain amount of courage when we come from EUR 1 billion. We look upon our run rate, we look upon how the market goes, we look upon how an Amazon works.
We look upon it and say, "Did we ever say before that this is our single biggest and most important store in the world?" Articulate clearly to our entire organization that this is the key store for us worldwide, and invest accordingly. That's what we're doing now, which is also the reason why you're seeing the CapEx number going up, because we have to build a different infrastructure to serve these consumers. From an engagement standpoint and from a profitability standpoint and from a growth standpoint, this is much more attractive. 59% growth last year in this space. 59% compared to the 18% for the company. Huge opportunity. Creating the New, as I said, is a strategy, and that's why right now, when we look upon it, we'll continue to come back to this picture over and over again because we're in execution mode.
We're not in strategy mode. Before I hand over to Eric, I do want to close and just say the following. We will, over the next three years, articulate a very clear roadmap under a number of different initiatives. Eric has done it already when it comes to brand. You'll see it coming in One adidas. You'll see it now coming in e-commerce. We took that up. You're seeing it in North America. We do want to hold ourselves accountable. We will not hit all the targets we're communicating. If we don't communicate, we can't get the focus where we need to get the focus, and we need to make sure that we're completely transparent internally and externally. We're linking our LTI to what we're saying to you so we create the level set of expectation, and that's how we're going to hold ourselves accountable for.
Last word before I hand over. It will not be a complete smooth ride from here to 2020. We will have bumps in the road. There'll be quarters that won't be the way we would like them to be. We believe that we can take the company from a EUR 19 billion organization to approximately EUR 25 billion-EUR 27 billion organization. It's a huge step in the right direction, and it should be able to create, which we are convinced about, a very attractive return to all of the owners of the company, driving EPS to 20%-22% over that period of time. With this, I'd like to thank you for your attention, then we do a short break. Is that correct? I think we give you refreshments, then we start with Eric in five minutes' time. I think that's the right way of saying it.
Thank you.
Good morning, everybody. Come on, you can applaud for that. That's pretty exciting stuff. I'm the brand guy, we're going to get a little bit more excited. We're going to stand up and do some cheers in a minute. Welcome from my side. Good morning to Investor Day. I'm Eric Liedtke, as you can see up there. I'm in charge of global brands. What I want to do today is, many of you I've met two years ago to the day, almost, when we kicked off Creating the New. I kind of want to give you an update on what that was. For those of you that weren't here, some of the information may be new to you. I'd like to introduce that to you.
What I'd like to do is take you on a journey of what we said we'd do, what we've done, and what our opportunities are still in front of us. Pretty simple run of show. Hopefully, it's compelling to you guys. Kasper talked about this from a company standpoint, I'll talk about this from a brand standpoint, because for those of you that study brands and study successful brands over the recent history, you start to see this purpose-driven company come through and through. The why, if you follow Simon Sinek. What is our why? What is our reason for being? What we really wanted to define is what is that core essence to why we're here as a company, why we're here as a brand. Through sport, we have the power to change lives. There's some key words in there.
First of all, it's through sport. We are a sports company. We want to be the best sports brand in the world. The key word here is we. We have the power to change lives, that's something we hold internally from each one of our employees to how we look at ourselves as a brand, we take that very seriously. Whether you're helping locally in Erlangen with the refugee crisis of immigrants coming in from the Middle East, or whether you're looking at big global issues like trying to solve ocean plastics in the oceans and trying to create usable product out of that. Or whether you're working with the Obama administration to eliminate derogatory Native American mascot names, or even standing up for LGBT rights.
These are all things we take an active role in as a brand because it means something, because it matters, because brands can't stand on the sidelines of these things. They have to participate. This is not philanthropic. This is a driving force for what we are. Just to finish on this piece, when we spend time on the West Coast of America and we talk to the tech companies, we talk to the innovation that's happening there, whether it be Teslas or Pixars or Googles or Facebooks, this is what resonates with them most. They know this is what unleashes the potential of your people. Kasper talked about people. Kasper talked about culture. This is one of the things that fuels it.
I want to make sure you guys understand that this is a big and powering difference from us and everyone else in the industry, in my opinion. Our obsession. We don't like the word passion. Passion is one of those words that's a throwaway. Kasper talked about being obsessed about consumer. We don't focus on consumers. We're obsessed on consumers, and it tends to color the conversation a little differently. We're obsessed with helping athletes make a difference in their game, in their lives, in their world. To you guys, that may just look like pretty words on a PowerPoint. Hopefully, they're pretty. To us, it's a USP. It's a unique selling proposition, how we approach consumers. We don't look at them just in sport. We don't look at them in a box. We look at their life as well.
We know that they've got to balance the two. If you're going to play well, you're going to look good. We think that's not far enough. We also want to participate in their world. When you talk about centennials, you talk about millennials, you talk about Generation Z, whatever name you want to throw out there, you're talking about kids that are trying to find their way in a very complicated and very stressful and sometimes painful life as they go through it. They're looking for brands, they're looking for anyone that can help them on that journey. We take that serious. It goes back to our purpose. One other thing I'll come back to is we are creators, makers, and doers. We are the original sports brand. Adi Dassler, Sebastian talked about when he kicked off, he founded this industry.
That's why you guys are here in Herzogenaurach today. It's hallowed ground for our sports industry, he was the original creator of this thing. We are the original sports brand, I'll talk about a little bit later when we talk about our brand mix. Let's talk about our mission. It's the same as the company. It'd be very consistent. Our mission is to be the best sports brand in the world. No ifs, ands, or buts. What that means is we basically give ourselves a definition of what people say about us when we're not in the room, that includes you guys. How we interact with you, how we're transparent with you guys, how we provide you guys information, how we perform for you ultimately is how you guys are going to describe us when you leave here.
We'll know that because we'll be in conversation with you to know if we're holding ourselves to the best. More importantly, it's about our customers at retail. It's about our partners that we interact with. Most importantly, it's about our consumers. We want our consumers to say they're the best, just like you guys do. Whether it's the suits you wear, whether it's the cars you drive, whether it's the laptops you use, you describe your favorite as the best. That's how we'll know we're there, we pay very specific attention to that. As Kasper said, it's not always the biggest, it is the best. Our belief, our obsession, our mission. We've a very clear positioning in our marketplace. Sports is a complicated, busy, competitive field. You guys know it. Everybody likes to talk about sports.
Not just in our industry, but in the beverage industry, in the insurance industry, in the vertical apparel industry. Everyone talks about sports because sports is sexy. Sports is cool, right? I love this sport. I love working in this industry because it is sports, because I'm a sports guy. Everyone wants to tap into that. Without us having a clear positioning, it's very hard to differentiate ourselves. One of the clear things we came to, and you've gotten used to the word now, when we wrote the SBP, is our positioning in the marketplace. We are the creator sports brand. What that does is it informs everything we do. We challenge convention. We see ourselves as a work in progress, which means we have to be very confident. We have to be very collaborative to go out there and figure things out.
We don't always have all the answers, which is kind of cool because we're a creator. We're looking for what's next. We imagine what's possible, and that's the key thing. Many people in our industry talk about hard work. Work, work, work, and maybe win. Blood, sweat, and tears. That's the typical starting place of our industry and how you position yourselves. Some people talk about attitude. Mind over matter. What we're talking about is imagining what the future holds. What we're talking about is creating what the future is. Like I said, that informs not only the product we make, the videos you see, the retail we create, but it also informs the partners we look at and how we act. Please keep this in mind as you think about it, because hold us to this level.
It's a very exciting place because it also informs who we talk to. We have clear focus on six consumer groups. Within those, we really go after the creator consumer. As Kasper said, and I've already said it again, we are consumer obsessed, which means we spend a lot of time looking at these six consumer groups. When I travel the markets, when my first line travels the markets, when anybody travels the markets, it's not good enough to go visit retail. It's not good enough to go see customers. You've got to spend time with the consumer. We spend a lot of time one-to-one shopping, assisted shopping with consumers, a lot of focus groups. We're talking about every market that we focus on. We're in there really drilling down to see how their lives are conducted and what's changing and what's current.
It informs a lot of our initiatives around digital that Kasper already spoke to. In simple form, male athlete, female athlete, young athlete, streetwear hound. They're at the top and they're very clear. Some of them cross over. You might have a male athlete on the field and he might be a streetwear hound off of it because we recognize they have a game and a life, as I spoke to already. We really look at how those things intersect. We look at the female athlete. There's several different. There's a vertical female athlete that still has a coach and still playing on a team. Then there's a post-college sports club, whatever you call it, athlete called the versatile female athlete. We call her the VFA. She's really looking at defining sport on her terms. I'll speak about her a little bit later.
We're very nuanced in some of these, but we have clear six categories as we do. We build different products, different collections, different experiences, different services against those six consumers. Okay? Our creator strategy for consumers is not exclusive. All of you guys are invited. Some of you may be creators, some of you may not be creators. I fancy myself a post-creator phase in my life right now, but I still desire to be a creator, therefore, I desire the product and services that are created for them. Anyway, I digress. When I've been speaking to a lot of you guys in some of my travels, when I go out on the road with the investor shows, one of the things that always seems to be compelling story is kind of from an operating model. We've got our belief, obsession, mission.
We've got our positioning. Those are floor items, right? Those things will stay forevermore. What we needed to do then was infuse an operating model or organizational model that started to drive these initiatives or these sentiments into the organization. What I need to do is show you how we were organized to show you how we are organized today to kind of take you on a little journey. We call this journey brand leadership. We actually call it a brand leadership operating model that's going through the entire organization. I've got a little spotlight here. What I wanted to show you is the organization, four years ago, I would say. Three years ago, we introduced brand leadership operating model. Four years ago, from a creation standpoint, from a brand organization standpoint, you had a consumer here.
Let's call him a football player. Let's call him Raheem. Basically, you had a lot of different touch points to that football player because we were functionally driven as a matrix. You had the business units over here. You had football coming down. They had a touch point to him. You had design that was split out from the business units that also had a touch point to him based upon the product we did. You had go-to-market that was putting together collections of product, collections of materials that would also have a person focused on him. You had brand marketing from a communication standpoint that was focused on him. You had retail that was, again, a separate entity, so when you talk about a soccer specialty or football specialty, you had them building concepts that were unrelated over here, talking to him.
Retail environments, as I just talked about. Brand design and events. We might be putting on events in Berlin against this player that may or may not be tied into the rest, coming into him, and then you had innovations that were also coming into him. All of those were unrelated to sports marketing up here, which also had who we would sign, clubs or players or leagues. That was kind of what we started with about four years ago. When you hear brand leadership, we knew that we had to get much more consumer-focused and much more accountable in our organization and operating model to win the consumer. That's where we were. September 2014, we introduced this model, which cleaned it up a little bit. What we basically said was, we empowered six business units to win their singular consumer.
We put design, we put product marketing, we put brand marketing, we put sports marketing, we put distribution, all accountable to these individuals up here called general managers. We have general managers for each of those business units that run those businesses going forward. Being realistic, I know that big organizations are matrix regardless. If I let all those guys run, we quickly have 6 different brands. We don't want to do that. We tie the brand together through a tight-knit, what we call blue boxes. As you can see, it's blue on the chart. The blue boxes actually tie it together. There we have very strong creative direction coming across. They have guardrails that allow the business units to know what do we need to do from a branding standpoint, what we need from a silhouette, what our initiatives are for materials.
You've got strict strategy coming across. They're setting one course of strategy. Innovations, brand management, which is brand marketing and sports marketing. These are the brand guys that tie adidas together, and these guys get their walking orders and then drive like hell to win their consumers. Clear? It's better in a one-to-one where I can draw it. You can see the difference in accountability. You can see the difference in how we've loaded things in. There's one point of view going to that football player again. There's one point of view going to the runner. As we focus on that's critical. Then the three, I guess, guidelines to the operating model we just talked about, the three key enablers. The first thing is we wanted to do was empower people to win the consumers.
Within that model of general managers, we've clearly empowered them to win the consumer with no ifs, ands, or buts. The running GM has to win the runner globally. He's empowered to do that. We've given him all responsibility to do that. If he can't do that, we'll know that soon enough and we'll have to make a change. Okay? The second thing we did was we lower escalation levels in the organization so people can move fast. That confusing chart I showed you in the beginning with all the different reports to, we basically took that layer out. It resulted in about 30 vice presidents 3 years ago that were eliminated from the organization. Not the people necessarily, but the positions were, because they were in the way. The other thing you might have seen on this slide is that all these people report to me.
What that allows us to do is have quick escalation. We can get quick decisions. We can get decisions within hours, if not one day. In the past, it would have taken a little longer to get through the different channels to get escalation levels up to a decision. That allows us to move fast and make real-time decisions. The third thing, the third belief of brand leadership is, if we win the consumer, which we're accountable to do, we win market share. If we win market share, we will drive our growth. When you do that, then you can get world-class profitability, not the other way around. Kasper talked about balancing short-term, long-term. I totally agree. You've got to win your way to long-term profitability, not cut your way to short-term profitability. It's not sustainable. Okay?
That's the operating model of brand leadership in a very fly-by way. It's very critical to our success because it's put discipline, structure, and accountability into our organization. Now think about that. We drive that now through the markets as well. This journey is never complete, guys. You always have to optimize this journey because it also is fueled by how our behaviors are as well. Okay? Let's talk about brand architecture. How are we set up as a brand to win the marketplace? We have the good fortune to have multiple brand marks that we can play into the consumer. Here's how it kind of sets up. We have what we call the Badge of Sport, which is this logo, and we have the Trefoil, which is this logo. The brand mark is the Badge of Sport. The Trefoil is a sub-brand.
The Trefoil, everything is encompassing as the best sports brand. The Badge of Sport is the best sports brand today. The Trefoil is the best sports brand from yesterday. As I said earlier, the Trefoil is the original sports brand and was the best of its day. Underpinning both of those is what we call our Core with the linear logo. We call that a linear logo, if you hear this language. Sorry for the insider speak. What that does is it kind of underpins from a value consumer standpoint. It starts to build product and looking at these price points that can go into these commercial channels that allows us to make the Badge of Sport and Trefoil more elevated and more premium. That's how the three kind of interact.
They're all tied together by stripes, and you see stripes on any one of these products. Those don't change. That's for every product we make. Okay? It doesn't mean it's on every product, but the stripes are the first read from a consumer standpoint. They're nuanced underneath that. Another question always comes up to me, and I thought I'd just put it on the table here, as the Germans say, "Fish on the tish." We will talk about our mix between these labels. One of the favorite questions and most frequent questions I get from you guys is, are we comfortable with the mix? As Kasper said, in America, I think we have 80% growth here and 40% here in running and 22% in training in the U.S. Are we comfortable in how these tie together?
I just take a few minutes to take you through why I feel I'm very comfortable in how the mix is balanced today and how the mix is going forward tomorrow. First of all, let's review in case you weren't paying attention. We have a belief, obsession, mission. Within the mission is to be the best. As I said earlier, the Badge of Sport is the best today. The Trefoil is the best from yesterday. We also, within our obsession, we talk about being the original sports brand. That's a critical component. We have those two things going together. The original sports brand infuses what we do, not only yesterday, but how we bring that to market today. First thing. Second thing, from a consumer view. Of the total sports athleisure market globally, it's about EUR 115 billion.
Of that, according to NPD, and this research was just concluded in September of last year, nine top markets. You've got, when you ask the consumer how they're using the product that they bought from our industry, 67% are saying for leisure wear. Okay? 33% are for sport. It doesn't mean we want to become a leisure brand. It just means that we need to understand how the consumers are digesting and consuming our product. Okay? In my experience, I've been doing this for quite some time, 23 years to be exact, I think this number is actually 75%-80%. Most of you guys know Matt Powell. He's the chief analyst for NPD. We just had a conversation last month in Boston. They just did some new research. In his mind, he's quoting 75%.
Just want to give you some context how the consumer is digesting and consuming the product in our industry. It doesn't mean we come off of sport. It means we have that sport credentials that we take into streetwear, we take into, I hate the word leisure, but that's how the consumers we take into athleisure and such. Okay? How do we then set up our Originals business, the business that's under Trefoil? Okay? What you guys also need to know here is that we have a very clear segmentation of our franchises. Our franchises are product that you can trust, that the consumers look to consume. Within it, we've got our iconics, Superstar, Stan Smith, Gazelle, Samba, Campus. These are products that we have the richest archive in the industry of, and they're products that we bring back with very little iteration, typically one for one.
Sure, we did a Pharrell Superstar collection a year and a half ago where we did a bunch of colors, it really was the Superstar one for one. That's about 50% of our franchise models coming out of Originals. The other 50% is what we call our modern franchises and Originals. Those are products that are infused from yesterday but brought into with new materials and innovations. They've got the Primeknit from a material upper standpoint. They've got Boost sometimes. They've got Cloudfoam in other instances. They've got Alphabounce in some of those other instances. They're infused with modern technology, but they're borrowing from yesterday. The last thing we dig into on modern franchises is our modern silhouettes are always born from our collective memory of the original. I know that might be harder for some of you guys to see.
I've actually set up a display here. I welcome you to it later. Here is the Micropacer. The Micropacer was a 1982 shoe with the first microchip in it, you guys can see that. It infused and informed the success we're having with the Nomad today. From an authenticity standpoint, this is critical. From a leadership standpoint, to draw these parallels, to go from what we knew then, we know now type of scenario or to borrow from our leadership position from yesterday into today, it's very critical. We've done the same thing on our Tubular franchise. We've got the same thing in Equipment. You can see it here in real life. Here's the Micropacer. Again, the plugs were kind of the defining thing.
The designers play with it, and you can see how that's translated into a one for one, not one for one, but an inspired design direction for Nomad. You guys may not see that. The consumer certainly sees that. The consumer certainly gets that, and that's the critical part. It doesn't really matter what you guys get. I'm sorry to say that. I want you guys to understand. I'm trying to give you content, but it's about the kid. All right. My first laugh of the day. All right. Good. We're on a roll. It's really important you guys understand this, and that's why we've set up such a nice display. Even the Boston Super, these were innovations of their time, the greatest innovations of cushioning that you could have.
Now we bring them into a modern look, and that's what's really set Originals free, in my opinion, because Paul Gaudio, our creative director, gave them very clear guidance. He said, "Everything you do must be from the collective memory of sport." In the past, you may have been following us for a while, five years ago, we had wings on shoes. I don't get it. Okay? I'm not judging it, but it didn't come from anything that was born from us. If you're going to have a strategy that says you're the best sports brand, you need to be born from something that's credible, right? Here you'll see three silhouettes from our archives that can really show you where Nomad came from. It's not that difficult to see. A new launch we just had was the Equipment.
This was the one that, I hate to say it, was launched when I started with the company, and this is the modern one. You can see how they borrow from each other from design language. Again, we typically sometimes launch them together. You can buy this. I have a couple pairs. You can buy this, which is the modern version of it, the modern silhouette. Okay? It's important for you guys to know that because you've asked a lot. I will move on if I can find the right clicker. Okay. Let's go into categories. That's kind of our brand mix. When we talk about our categories, as Kasper talked about with markets, our categories have clear roles. In the past, in previous SPPs, we said there's key categories and by default, there's non-key categories. We don't believe in that.
We think there's a role for each category, we need to make sure we understand that role and that our GMs are empowered to achieve that role. First up, we want to lead. It means number 1 in every market. What are those categories? Football, Originals. I'm happy to say right now, we are undoubtedly leading in both of those globally. Maybe not in every market yet. We'll get there, but very much so according to NPD, we lead in both these areas. Job's never done. At this point in time, I can tell you as we stand here today in March 2017, we're leading in those 2 categories globally. Grow. Dramatic market share gains. Running, which a huge upside there, huge opportunity. We know we're under-punching our weight right there.
There's a lot of focus on how we go forward with running and some of the great things coming with UltraBOOST or Alphabounce or PureBOOST. Getting great sell-throughs, consistent sell-throughs, specifically in China, Western Europe, and the U.S., so much so that we have allocation issues. Running continues to tick along. We've got great growth in that area, as you saw from the 40% in the U.S. Core. Core is an interesting one. I just spoke to it. It's the underpinning. Core is a great business for us right now. We're talking about multi-billion EUR business a year, and we're looking at growing that together as we start to put that together and underpin not just Originals, but also the Badge of Sport. Athletics is a new area for us. Brand-new segment of training that we just launched.
It's basically the product we want you to wear to the game and from the game and on the sideline. Some of you might remember the Z.N.E. hoodie launch we did last year. Guys flipped up the hood and basically get in the zone, get prepared, get in that white, block out the noise, get in the white space to pre-game. It's a really rich area because it gives us all sorts of transition pieces. That's an area that really can capitalize on some of the "leisure opportunity" as well. It's born from sport. We have our authentication categories, which basically are our regional players that need to move, in my opinion, I'm pushing very hard, need to move into growth or even leadership.
We have heartbeat sports, which basically is your American football, your baseball, your rugby, your cricket, some of these ones that we call heartbeat. You get it, right? The ones you get emotional about, the ones you love to watch, but don't really produce huge commercial return. It's important for us to be there as the best sports brand. It's important to use them as an authenticator to sell more running and training product as we go to market. Basketball right now is a huge growth opportunity for us. We'll be realistic. We're nowhere right now. We just hired a new general manager, Chris Padaden. We're very excited about the potential. We've got some great assets in James Harden, MVP. Knock on wood. Here we go, James. It's really an authenticator right now.
We're using it in China, we're using it in the U.S., we're using it in Europe to authenticate our brand and sell more product. With the split between Athletics and Training, we see an opportunity to really go after a much more disciplined training, authentic area where we can really get into the gym and talk about how people perform from a physical standpoint, because Athletics can take the more lifestyle component off of their responsibility. That's kind of how we work through. We're having some good success. As I would say, there is tons of opportunity here going forward, too, especially within the growth area between Running, Core, and Athletics. We are very under-penetrated in those three areas, and I see dramatic growth coming there in the next months to years.
What I'd like to do now, because I've kind of set up the ecosystem, I guess. What I'll do now is I'll walk through the triangle with focus and take you guys through an update of open source, city, speed, and focus. Open source. Open source is something that was the hardest thing for me to explain to you guys, but it's probably been one of the richest things we've done because it explains how we make our product. Open source is not a thing, it's a mindset. It's about how we go into each and every conversation and how we go into each and every partnership going forward. It's allowed us to look at collaborations in a whole different light, and I'm talking about internal collaborations as well. We talk about doing all sorts of things between Originals and basketball, Originals and running, how we collaborate there.
That's almost an open source when you talk about some of the vertical categories we set up. More importantly, it's broken down externally into three different buckets. The first one is creative collaborations. Obviously, Mr. West is probably the most famous of our collaborations we've done, the most interesting to some, the most commercially resounding, I guess, in driving from an NPS standpoint forward from a consumer noise. I wouldn't underestimate some of the other partnerships we have, whether it be developing some of our Futurecraft product, which you can see on the back side of this wall, which are really statements of intent. Whether it be biofabrication product or whether it be new ways of manufacturing or new ways of making ocean plastic product into footwear. These were all done and born from an open-source collaboration with different creative talents. We've got some World Cup associations.
We've got Pharrell. You see there Matthew from Pixar. He comes in and helps us tell better stories. Pixar is the best at telling stories, right? We have to tell better stories as brands. We can't just throw product on the wall. We really open ourselves up to learn. Christine Day's come in and help us talk about our women's strategy. You see a lot of different collaborations that can come in and help us learn, because we're confident enough to know what we know and also know what we don't know and ask for help. We also do this with athlete collaborations. From a Runtastic standpoint, you see that we've not only acquired them, but we're looking at how we bring Runtastic into our knowledge base and how we bring their athletes into helping us suggest and choose and even critique product, if you will.
Glitch is a great example of a new innovation that we've done with athletes in London. It's a brand new product, but more importantly, it's a brand new business model where we go forward. It's all app-based, and it's all referral-based, and it gets into a subscription of buying new skins for uppers. Again, that's something we collaborate with them just to test it. We're only piloting it in London. If it works in London, we'll go globally really fast. We do things with run bases and communities and adidas runners and women's studios. These are all community-based, where we can sit down and have a heart-to-heart talk with our consumers to really help influence our future product and brand direction. Then finally, there's partner collaborations. Here we've had a tremendous amount of success, not just with BASF.
We've invented a new midsole with them called Boost, which is all the rage in the marketplace you guys know, but with Parley and Ocean Plastic Product, or with Speedfactory, with different partnerships that have helped us learn how to bring automation to local construction or with biofabrication, as I mentioned, or with EXOS as an athlete premiere. These are all just associations we're doing. You guys may not read about them or know about them, but believe me, they're having a dramatic effect on our portfolio of innovations and our portfolio of storytelling going forward. Next topic, let's talk about focus, because the focus area is pretty interesting about what we said we'd do in some certain areas and what we said we wouldn't do.
Product franchises, probably the most important focus area that I can talk to you about today because it's really generated a lot of our reason for being, and it's really started to really let us tell our stories through discreet and simplified product. What is a franchise? What isn't a franchise? A franchise is a product you trust. Think about the automobile, think about the laptop you use, think about the phone you use. It's a franchise you trust. In our industry, we want to have a consistent story. In the past, many times we would make product, throw it at the wall, see what stuck, and move to the next season. Now we want to build franchises through clear consumer insights. We obsessed on the consumers again to get an insight that allows us to have an idea on what the consumer is looking for.
We moved to building a clear identity where they can understand how that insight's being explained to them or brought to life for them. That's really critical. They need to be able to recognize it in a sea of product in our industry, whether it be our wholesalers or even our own stores sometimes. How do they find that singular UltraBOOST or that Stan Smith or that Alphabounce? If they've already trusted it, how do they find multiple iterations of that? We build specific plans for them. We have an authentication plan. How do we get it out in the marketplace? How do we get some buzz? Who do we put it on to get some notoriety? How do we market it and make sure that they're understanding that it's here for them? We iterate it. We don't settle on it.
We continue to turn it, but we always maintain that clear identity and that clear consumer insight. As I said, we have a clear life cycle plan. We have a launch, we have iterations, we have commercialization, and then we have a phasing down. That's just as important too, is what is the life cycle plan for the end of it? Sometimes we want to cut short consumer demand because we want to harness it into the next franchise, or we want to plan it for it to come back in a few more years. Here's what a franchise life cycle looks like. Basically, in a very broad sense, you come up with a story, and then we want to incubate it. We don't want to put too much commercial responsibility on it. We want to incubate it for a set length of time.
It doesn't mean every product has the same incubation. It doesn't mean every product gets nine months of incubation. No, this isn't biology. We're talking about some products can be driven by hype, some products can be driven by longevity. Based upon the different pieces of that, we're going to decide how fast we incubate it. Then we're going to turn iterations because what we found from our consumers, in general, they want to belong, but they want to be different. Stan Smith, white, green, you may love that one, but somebody else may want the black or whatever it may be. Iterations from a color standpoint, iterations from a style. Maybe we get some collaborations to come in there and twist it a little bit.
Maybe you put some different designers looking at it, but we iterate and iterate and iterate to make sure that we're capturing all the potential of it, because ultimately we want one consumer to buy three, four, or five pairs based upon the different iterations of it, but they still go back to the same franchise. They still trust it. In UltraBOOST, for example, we came out with a standard UltraBOOST. We then went to an uncaged UltraBOOST. Now we have a mid-top UltraBOOST. Now we have a laceless UltraBOOST coming out. We've got multiple versions of it with multiple colors. All of a sudden, you have one model representing 100 different SKUs that consumer could buy three to five of them. It's a real strong strategy of fit and feel and desire and trust against a multiple SKU strategy.
There's commercialization, obviously, where we maximize it, then just as important, we start to wind it down. We've got to start to plan it down so it has a soft landing, not a crash. Too many times in our history, we go up and we come down. We commercialize it right away, we take all the orders we can, and then we fall off the cliff. We can't afford to do that anymore, and we won't do that anymore. We continue to manage this very closely. The GMs are responsible in each of the categories for managing the life cycle of multiple franchises as they go on throughout a season and throughout a multi-year period.
They have to manage not just the volume, of course, but they have to manage the margin, the profitability, because not all franchises are making the same margin as we know. It gives us unbelievable leverage with the consumer, because we can have this relationship with the consumer where they're desiring it and coming back again. It gives us leverage with our comms efforts because we're telling one story instead of hundreds of stories, and it gives us great leverage with the factories. Franchise strategy, footwear, apparel, critical to our success so far, and will be a critical driver going forward. Let's talk about women. From a women's standpoint, we've got very clear objectives and our results are starting to come in, but we're not happy where we are today, and we'll continue to look at this as a huge opportunity.
I think, from a women's standpoint, as I talked about earlier, we've got a versatile female athlete, which is really the postgraduate athlete that's doing multiple sports based on her time. She's not being coached and wearing a uniform anymore. She's the real opportunity here. She's the one that's driven the Lululemon success. She's the one that our competitors are also going after, and she's driving a lot of the business in our industry. She needs to be spoken to a little bit differently. She follows people on her own time. What we've set out to do is really be the world's first co-created sports brand. What we want to do with her is really tap into her through the people she follows. She doesn't follow the Real Madrids, right? She doesn't follow the James Hardens. She follows her own cycle of influencers.
They typically are on Instagram or YouTube or some of the social media areas that we need to tap into. We put together a team of 25 influencers that come and work with us on a regular basis, whether it be here, whether it be at Wanderlust events, or whether it be in the States or even Europe. They travel with us. They work with us on product, they work with us on retail, and they work with us on our brand communications. From a product standpoint, she cares about five items. Two of the most important, the bra and the tight. You win those, you win those from a franchise standpoint, you win her trust there, you really got her. The third most important is the shoe. We really spent a lot of time talking about what is the bra, what is the clear strategy there?
What is the tight strategy? How do we get rid of some of the noise around it and really make it focused on a couple of key franchises? What is that running shoe? We dress the outfit from there. Of course, she needs T-shirts, she needs shorts, she needs a transition piece. Really focusing on those key items that win her trust is really what we're lasered in at. I'm happy to say our bra and tight business, since I last stood in front of you, is up 30%, but it's not good enough. It's coming from a very low base. Right now, our women's percent of business was 21% two years ago, now it's 23%. We still are striving for 28%, and we're still striving in the industry to double our market share.
Again, coming from a low base, these are all achievable targets. You did not see a women's business unit on my organizational chart earlier, because women's is the responsibility of training and running in every category. When we talk about the VFA, the versatile female athlete, we're going after running and training categories are the real specific areas, okay? Next area, sustainability. Kasper spoke about it. We did not talk about it two years ago. To me, when you talk about really making a difference in athlete's game, life, and world, the world part is really where we capture sustainability. We've always been really good at sustainability. We've always won lots of awards, whether it be the Dow Jones Sustainability Index or the multiple others that we get listed on a regular basis. We are the top player in our space, but that's not good enough.
We have a clear strategy on how we really go after sustainability. We want to reduce things. We want to reduce samples. We want to reduce materials. We want to have color consolidation. We want to reduce our packaging. We want to have less of a footprint. We replace things with Better Cotton, recycled polyester, you name it. We're looking at different things that are more natural and organic. We want to innovate our way out of some of the things we're doing, whether it be through Primeknit, whether it be through low water dyes, low waste modular, recycled polyester, carbon capture plastic, you name it. These are things we've done and we've continued doing for the last five years. The real difference has been when we started to put things on top of that. Because these are hygiene factors. A lot of companies can do these.
It's how you talk about sustainability that the consumer needs to understand. Again, it goes back to storytelling. When we associate ourselves with Parley, that changed everything for us. We've got the fundamental floor item necessity foundations of being a great sustainable company, and recognized from that by the NGOs and the environmental groups and the sustainability indexes. When we put Parley on top, it became a compelling consumer proposition. Now, I'm not sure how much you guys know about Parley, but Parley is an association that we helped found two years ago. What their singular objective is to take ocean plastic out of the oceans. If you guys aren't aware of it, ocean plastic is suffocating the oceans, and basically, it's entering the food stream, and we all have plastic in our bloodstreams because of it. It just is a fact.
How do we bring the plastic out and make it useful? Not only is it doing a good thing from that standpoint, but the consumer resonation is off the charts. I had the fortune to present the first Parley Ocean Plastic shoe at the UN to the General Assembly, and that singular photo opportunity that we had there traveled more than any Kanye West photo did on digital. That's the compelling factor. Kasper already talked about the commercial return. As we find, we talk to kids more and more, they want a trusted resource to opt in. We think this is a real USP for us when you talk about our industry, you talk about everywhere else. We not only see it as our responsibility and our obligation, we see it as an opportunity to win consumers to us because kids care.
They just don't know how to opt in. They're not given the chances. I would bet that 95% of you guys care, but you don't know how to opt in. We're giving opportunities to opt in to doing less damage and taking place in doing this. We've just started this relationship. Just so you guys have some numbers in mind, the Parley Ocean Plastic shoe was a Futurecraft statement of intent 12 months ago. This year, we'll do a million pairs. We figured out how to make it. We figured out how to do this. We'll do a million pairs, and our moonshot is to get off of virgin polyester overall. We're looking at that right now within the next five years. This is something we're taking very seriously as we go forward. Focus on marketing spend.
Another question that comes up a lot, how are you guys spending your money? Obviously, we want to make sure that our MWB is being optimized. Many of the things that Kasper spoke about and many of the things that Robin will speak about later will come down to how we're looking at this and how we're making sure we maintain and get leverage out of our MWB, we're not going to cut our MWB. Right, Kasper? Thank you. He said no, just for those guys watching at home. What we need to do is make sure we're doing it better. What we're doing better is we're making sure that we've got a clear reason to believe in our brand and telling our big stories. The big stories that we've talked about already, how are people going to believe in us?
We've got clear reason to buy stories around select products that we want to go to battle with. They all should build to a brand advocacy, watching the NPS. This is very much a movement away from our historically deep-rooted, multi-sport, huge sports marketing investments, moving to a much more activation, non-fixed budget allocation. It is different than anyone else in the industry. We're moving to a more nimble model where we've got more flexible money that we can take advantage of opportunities that come up, and opportunities primarily in the digital space. That's how we'll win our consumer by being in touch with them on a constant basis. We also need to make sure we're driving those digital conversations right into e-com to hit our EUR 4 billion number. We're very excited about this. It doesn't mean we're leaving the field of play.
It just means we're being a lot smarter about how we participate in the teams, leagues, clubs that we sponsored in the past. You'll see that from looking at some of the actions we've taken, whether it be with the NBA, whether it be with Chelsea. We're going through a very rigorous process of analyzing what we're going to pay for, where we're going to pay for it, and whether its return on investment is good enough. Okay? We will continue to lower the % of our MWB spend in our fixed budgets going forward. Doesn't mean we're coming away from clubs and teams and leagues. It means we're investing more in players because they resonate more with the creator consumer we're going after. The last area of focus that we talked about two years ago is mean more by doing less.
We've had great success. Since I've seen you two years ago, from a model standpoint, I stood on stage and said we'd reduce our models by 25%. By the end of the plan, we've already done that. We're now going to another 20%. We really want to keep ratcheting up our model reduction because as we do that, as we continue to focus on franchises, we don't need as much stuff. To be quite honest, what the creator wants from us is stuff that we can put a spotlight on and really get their attention with and really drive demand with. We're going to start to really continue to whack down both models and articles, which again, will give us great leverage, not only internally with our operating headcounts, but also with leverage with the consumer and leverage with the factory.
The franchise strategy ties right back into this mean more by doing a lot less. You'll see this continue to come down. We've also opened that up, and to be very transparent for you guys, within our production, our communications production, I'm talking about there. What we're doing is we're, again, telling too many stories that are disconnected. As we start to focus down on our reason to believe, our reason to buy, our franchise stories, we're going to start to really cut down on our production days dramatically. Again, that's a minimum of 25%-30% cut from where we are today. Retail formats. You're getting the theme here, again, we need to cut down on the amount of offerings we have in the marketplace and really centralize what we're doing.
We've just introduced a brand-new concept we're very excited about on Fifth Avenue called Stadium. It's a great retail format, it will start to drive all of our look and feel across the world and across our own retail, but also our wholesalers going forward. It speaks to the creator brand that we want people to imagine when they come in. Moving to the next area. We talk about cities. What I just talked about was open source and focus, basically how and what we make. Cities is where we implement, and that's a key point. Cities are critical for us. Obviously, it's because cities are where the creator lives or wants to live, and most certainly looks to for inspiration. Again, because we're all carrying around computers in our pockets, the kids can follow these cities anywhere they want, anytime they want.
That's more and more prevalent in our conversations with these kids. We start with six, L.A., New York, London, Paris, Shanghai, Tokyo. Doesn't mean we don't do anything in any other cities. It means that we focus our learnings, we focus our resources there to start to really blow that out. It means we want to have a flagship in each one of those cities going forward. It means we want to make sure we're really spending time with the consumers in those cities to learn what it is that's turning them on and what it is that's turning them off going forward. Cities is a critical place of where we bring everything together. Three things we kind of want to do within cities. We want to have a connected experience for the consumer.
Yes, that means digital, it also means how are we syncing up Some of the things I talked about earlier when we talked about our run bases or our studios for the VFA, how do we sync those up with retail, not only ours, but our wholesalers? How do you bring the whole thing together? How do we build more communities and cities? What I mean by that is, what are we looking to have a relationship with a community when we have a lasting, ongoing one-to-one community? Do we need to start some things? Can we access something that's going on? It's not good enough to go sponsor marathons anymore.
We need to get into a one-to-one conversation, whether it be Berlin, whether it be Paris, whether it be New York, with communities that exist, or we need to give them an opportunity, a platform to create their own. Lastly, we need to really focus on what are the key trade zones in each one of these cities. There's a lot of work going on to say, how do we dominate trade zones within different cities? How do we look at the different areas, whether it be Fulton Street in New York or whether it be Les Halles in Paris? How do we start to really have an impact there through multi stores, through whether our key partners, like a Foot Locker or a JD or a Finish Line?
How do we then also bring our special sauce to that, and how do we bring that through a mobile transaction as well? Three distinct areas bringing our strategy to life on the streets of cities. I'm happy to say, just to repeat what Kasper said earlier, we are having good effect by doing this, just by turning and focusing and putting our resources there. We've got city general managers that are conducting all of these strategies in the city for us. They're bringing our product to life there. They're bringing our stories to life. Our NPS is up. It's up not just from an absolute standpoint, it's up from a relative standpoint against our competitors. Our net sales are up dramatically 33%, and our market share is growing as well. Good. Still tons of opportunity. It's all relative coming from the base that we're coming from.
Continue to watch this, continue to see nice, strong double-digit growth. Finally, the last point on the pyramid, if you're the arrow directing to brand desire, is speed. Speed is a behavior, but in this case, we're talking about a go-to-market strategy. In 1962, our current model in the industry was invented. It's called backlogs. It's called futures. You guys know it, use it as an indicator for how you value success in outward-looking. It was invented in 1962, in case you didn't know that. We haven't changed yet. The model is based on a six-month outlook. You take an order six months before you deliver it to the retailer. What world are we living in that anyone's waiting six months for anything? It's a rhetorical question, but you guys know where I'm going.
We want to give the consumer what they want, when they want it, where they want it. That's the simple basis of speed. With that, we set ourselves on a journey to really disrupt our industry forevermore. The wholesale model today in every market you go to is based on futures. We can't accept that. Our consumer won't accept that, and the world won't accept that. To me, as we are the creator sports brand, we see an opportunity to recreate how our product is procured and delivered in a timely fashion. We do it through four simple areas, right? Well, sorry, there's four benefits, if you will. If we can give the consumer what they want, when they want it, where they want it, we decrease risk.
Right now, the futures game, you're guessing what might be popular, and you're trusting your wholesale buyer to guess with you. Let's be honest, that's the model today. If we give the consumer what they want, when they want it, where they want it, we increase their NPS. We increase our brand advocacy. Of course, our net sales go up, and of course, we have less discounts and cancellations, and we have much more full-price sale. That's the strategy behind speed. It's not fast fashion. It's about giving the consumer what they want, when they want it, where they want it. It's about reading and reacting. We do it through three simple areas. In-season creation. That means we don't create 12 months out. Right now, our current calendar, traditionally in this industry, is 18 months.
From the time a designer sits down to design to the time the consumer gets it's 18 months. We can reduce that. We can do a lot better. We can go six months. We can go three months. We can go as short as we need to go based on technology that we're pushing. It's based on never out of stock. It's based on having product on hand for them, and it's based on planned responsiveness. The planned responsiveness basically is having materials on hand from tier 2 or tier 3 suppliers that can replace a product that you get a read on. I'll give you a little story because I think stories are always better. This is the Tubular Shadow. This is in the market today. In October, we launched it. October or November, we launched it. Doesn't matter. That's not important to the story.
We launched it with about 250,000 pairs globally. What that told me was it's not significant enough. The buyers really didn't like it, so we weren't really selling it. Okay. We believed in it, so we had it planned. We had planned responsiveness on it, so we're able to chase it. It hit the market, and it went like crazy. Consumers ate it up. Of course, nobody had enough pairs. We knew that was coming. Within 60 days, we were able to put 1.1 million pairs in the marketplace. 250 was the upfront order. We came back with 1.1 million pairs in 60 days. We came back with three million pairs in six months. We're coming back with eight million pairs within 12 months. That's speed. You get the point. Speed net share right now, our speed-enabled product is 25%.
We have 25% of our franchises and our models I talked about earlier on speed. Based on our indications from our own channel and from e-com, that's about a 10% increase in full price share. By 2020, we know this can be 50% of our product will be speed enabled, and we'll have a 20% lift on full price sales. It's that important to where we're going. We're not going to stop there because we can. We think this is such an antiquated model, the futures model. We need to continue to innovate. It's not about a channel mix as much as it's about bringing people along the journey. The biggest success there was 95% wholesale. It's not about e-commerce or controlled retail, it's about giving your partners the benefit of speed, and they're all over it. We're not going to stop there.
You guys have heard about it. The future also belongs to what we're creating around Speedfactory. Right now, the pairs are very small. It's a statement of intent. As I told you earlier, when we do statements of intent in product, we figure out how to commercialize it. We've got two factories. We've got one here in Ansbach down the road. We've got one opening up outside of Atlanta. That is bringing automation to production in our industry, and we're continuing to work with partners through this collaborative mindset, through open source mindset to really enable us to go faster, to go further, and to produce more pairs. Others like to talk about what they're doing. We're doing it. You'll start to see production of this ramp up more and more in the coming days. That's a lot of stuff.
Hopefully, you guys feel like you've been educated and updated or whatever you want to call it. There's three things I would tell you that have led to our success the last few years, and there's three things that I'll tell you that will lead to our success going forward. One is we know who we are. We're very clear on who we are as a brand. Very, very clear. Kasper's come up here and endorsed it. He vetted it. He finds it to be very powerful, and the success speaks for itself. Two, we are obsessed with the consumer. I challenge anyone else in the industry to find a company in our industry or out that knows more about their consumer and what their needs are today and tomorrow. We're very laser-like and we're organized against it, and we have an operating model against it.
Third, it's our secret sauce, is our culture. We have a world-class, if not the world-class culture of creativity innovation. You were able to tap into a little bit last night when we hosted you over in our creation building. You see the environment. Hopefully, you felt a little bit of that energy. When the people are in it, you can't believe the progress we're making. That's it for me. Thank you very much. Now it's my pleasure to announce a 30-minute break, right, Sebastian? You can get up, move around, get some food as you like. Take care, and be here all day.
Welcome back, everybody. Did you enjoy the break? All fit and ready for this somewhat less exciting section. You heard all of the key messages from Kasper and Eric. My job, as you're probably not surprised to hear, is really put this into terms of the P&L. I suspect that is also of some interest to you. At least I certainly hope so. You've seen this chart a lot, not just today, but as we introduced the strategy two years ago. We were very clear in the messaging of why we've chosen this particular strategy. It's all centered around the consumer and increasing brand desirability.
That brand desirability in itself, in its economic model, is there to create that top line growth, which leads to market share gains, which as Eric explained a few minutes ago, brings us into a higher margin, which allows us to leverage that and invest back into this economic cycle to create brand desirability all over again. When we announced this two years ago, there was some skepticism. Well, it was a plan. I think it's very clear that over the last two years, we have, with that plan, created significant value. This is not just a statement, it is a fact. If you think of the period, the 24 months from March 2015 when we announced this, I believe our shareholder return in this period up to today is about 160%, we're in a period where the DAX has been pretty flat.
I suspect you will not find a competitor or anybody near a competitor with that sort of performance. That means that brand desirability is indeed driving that top line, which is translating into profitability. I know that that idea of profitability enhancement is key to your understanding of what we are trying to do over the next period as well, and it's all to generate value creation. I mentioned to you a couple of years ago that the journey that we're on won't necessarily be something like that. There will be ups and downs. We also said it is a journey. We need to take time to establish the strategy, to build on it, to become more impactful, eventually accelerate onto that.
Clearly, as you have seen the performance over the last couple of years, that has been actually a little bit improved in that we have now not just been building in 2016, we've actually had real impact with our consumers. That allows us now, already in 2017, as Sebastian said when he introduced this, to really accelerate this plan and drive through 2018, 2019, and 2020. You've seen the effects of that with the expectations that we now have. Kasper showed this slide, and we were quite, we thought, bullish at that stage when we announced this, because we were looking at a 2015 estimated to be around EUR 15 billion. It was still high single digit CAGR to get us to the EUR 22 billion.
Looked good at the time, actually, because brand leadership had kicked in the end of 2014, we'd done quite a lot to start us off on this journey in 2015. 2015 came in at EUR 16.9 billion. You've just seen the 2016 results, therefore, obviously, that EUR 22 billion, as Kasper said, was not ambitious enough. We have therefore just recently updated this to a more realistic 10%-12% CAGR over this total time period to bring us to this EUR 25 billion-EUR 27 billion. As Kasper said, that is without TaylorMade and CCM. If we want to put that into comparison of what our last plan of Creating the New was, that was EUR 22 billion, including TaylorMade and CCM. That also you need to remember when you're thinking of this. The actual figures of that, it's coming obviously.
Driving this is the enhanced growth expectations we have from the adidas brand. Going from 7%-9% growth now to a double-digit 11%-13% CAGR over this period. We haven't increased the expectation for the Reebok brand. Still a good, very good high single-digit growth expectation. Here it's about growing the quality of those sales, improving the profitability, having a better quality Reebok growth there, and therefore the group growing the 10%-12%, because obviously TaylorMade will no longer be in the company. I think this is an important chart because we're also having a very broad-based growth. That growth is not just focused on a particular market. It's definitely not focused on a particular category. It is very broad-based. From our three top markets, they are the ones that are delivering the vast majority of this growth.
Over 85% of it coming from North America, Greater China, and Western Europe. Growth is only part of the equation, obviously. We're talking P&L, I need that growth, I also need to get that leverage now down into the bottom line. Kasper introduced this in terms of we have four key areas that we know are going to drive profitability over the next few years. A lot of what I've got on this chart has been already touched on by both Kasper and Eric. What I want to talk about now are two key areas. That is Reebok Muscle Up and operating efficiency under what we call "One adidas". Let's start with Reebok. I know this is still an area that you have a very healthy interest in.
I am very optimistic that the actions that we took last year have finally put Reebok into a situation where we can also deliver on not just our expectations for this brand, but also your expectations for this brand. Let's look at what actually the situation is at the moment in a neutral, non-emotive way. We are enjoying, for the third year in a row, good, solid growth. In fact, double-digit growth outside of the U.S. We're clearly getting a lot of consumers to find the brand, to identify that brand, and even to love that brand in the various areas that Reebok is concentrating on, particularly in some of the niche parts of fitness. Don't forget that when you review Reebok, that there's been considerable change over the years.
Most recently, not just taking out the low-priced product, but also replacing over half a billion of team sportswear business that we used to have under that brand. Also with Reebok, we're identifying that brand and the credibility of that brand with certain key icons and influences which are also generating more love for the brand with some consumers. We cannot deny and do not deny, Kasper called this out very clearly also in November, that we have significant challenges also with Reebok. It is not where Reebok needs to be in the family of adidas. We are not growing as we should be growing in the States. In fact, we're underperforming the market in the States. We're not winning enough younger consumers into the brand.
People are not finding Reebok unless they really have some sort of interest in some of the niche fitness areas such as CrossFit, Tough Mudder, Spartan Race, those sort of things. Clearly, the profitability, as is no surprise to you, I'm sure, is underperforming that of not just our expectations, but also the rest of the group, and therefore it is also dilutive at the moment to the total earnings of the company. What are we doing about it? We have this program called Muscle Up. Without going to all the detail of Muscle Up, let's look at a couple of highlights. We have 3 key markets that we're focused on for Reebok, where we expect good growth. America obviously has to lead that. There's also tremendous further growth opportunity in Western Europe and significant growth opportunities in China.
There are 3 focus categories for the brand of Reebok. It's fitness. What is core to fitness? Training and running. Then also it has a rich heritage, which allows us also to sell classic product here. Growth is only part of it. We need to get that efficiency, a lot of what we were doing with Muscle Up is to improve that profitability and therefore getting long-term sustainable leverage. This is not happening immediately. We have to focus to get, firstly, that profitability improvement, then we have to develop that into a longer sustainable growth, which gives us even more leverage and sustainable margin development. That's the journey over the next couple of years. Specifically, the key initiatives that we're following under Muscle Up are not vastly different to what we have been doing with brand adidas.
That's focusing on the right things, putting the consumer and the interests of the consumer at the heart of this, and really with consequence, delivering on initiatives such as the designing to value, such as being more focused on where we're spending our marketing dollars, such as really focusing now on key accounts or prioritizing certain accounts, having a very clear messaging in our business model, implementing what we believe is the better strategy for addressing the Reebok credibilities to the consumers there. That will also include specific initiatives such as readdressing our footprint of factory outlets and retail shops in America. That was part of our announcement in November last year and will play a role through this coming year as well. It's work in progress.
We cannot tick everything off at the moment, but we can already say that a lot of what we're planning to do under Muscle Up, we're already doing. Clearly, the definition of Reebok's place has been clarified, and we can tick that one off. We're still in the process of the reorganization of that brand. We made a major statement in November about cleaning up the operations in Canton, removing the Reebok brand from what were large corporate headquarters, which we will then sell, and bringing them now into a location in Boston that's a dedicated place for the Reebok creators. Also, in that sense, removing corporate functions from there, so they're really focused on that. In terms of brand leadership, it's been core to the adidas success, also making sure that that's implemented into the Reebok organization and that we can also tick off.
Streamlining the store network, a lot of progress. We said we'd be closing about 50 of the factory outlets and being very cautious on what we're opening in terms of fit hubs. We've already, by today, closed somewhat over 20 of those factory outlets. We're well on the way with that, but not complete. There's a lot of things that we've already done in making the brand more relevant with consumers in terms of how we go to market with them, how we communicate with the consumers. Reebok and Muscle Up, I think my suggestion is tick the box for that. It's work in progress, certainly, but it's something that we have a very good focus on, and you can see us report on the development of that over the next few months. Let me talk now about this concept of One adidas.
Kasper introduced it as a key building block to our improvement of profitability. There are three key pillars of what we mean by One adidas. There's the brand leadership concept, which Eric spoke in detail about. There's the marketing effectiveness, which as also Eric clearly pointed out, does not mean in any way cutting back on our investment in the brand and cutting marketing. It just means getting more leverage out of our marketing by doing our marketing more perhaps sensibly and freeing up monies for more activation rather than some of the long-term concepts. My job now is to talk more about the operating efficiencies part of One adidas. They include global business services, non-trade procurement, some supply chain efficiencies, looking at our strategic workforce planning, and global real estate. Let me start with this concept of global business services.
This should not be something completely foreign to any of you. In fact, it's not even foreign to us. We started some years ago to do a financial shared services setup, but very small. We're still very small in this area. Now we see a significant opportunity, learning from what we've done with financial shared services, to extend a shared service concept, not just broadly and within the width of finance, but also in the depth of what we do in finance, but adding to that as well other functions. As an example, HR or human resources. This is not just because we believe by centralizing and harmonizing some of these activities that we take costs out. We do that, yes. That is part of the reason.
Also, we're doing this so that we can make sure that we're standardizing a lot of our procedures, making us more impactful also. With that, we get increased governance and opportunities to ensure high compliance, obviously. At the end of the day, we're also providing a service to customers. Customers, perhaps in this case, internally, but they also are customers, and therefore, through a global business services set up, we would expect to have a faster delivery of those services also to the various customers. We're removing, therefore, with GBS, a lot of the time-consuming efforts that we have in the organization at the moment, particularly because Kasper referred to this earlier, that we have been optimizing local areas. We've been optimizing markets in some cases.
This concept of GBS takes us above markets and enables us to harmonize a lot of our processes and therefore also harmonize our cost structure. We also want to be best in class in this area, so we will therefore be striving for excellence, which our GBS will allow us to do. As I said, it allows us also to be a better provider of services to the internal consumer. It's one common governance and organization for more than just finance for many of the functions within adidas. The second item of efficiency that you can take as an example of how we're improving our profitability is the concept of non-trade procurement. Clearly, the large amount of where we spend our money is in buying our product.
We also spend several billion EUR on other expenses, which we can improve the efficiency of that spend by implementing this concept of non-trade procurement. This is, again, not totally new to us. In certain areas, we are doing this, but again, very much focused on particular markets. We have an opportunity now to go broader with this and to cover all of the non-trade categories, build up catalogs, get expertise in this, build up the supplier base so that we can be more impactful in what we're buying globally and therefore also make sure that that is cheaper for the organization. It will also enable various things like improving this increase of hands-free purchases or automated replenishments and things like that. It sets us up clearly to be able to capitalize on all the opportunities we would have through the digitalization initiatives that we're following.
The supply chain management, however, also offers us still opportunities to improve efficiencies here. Let's not talk about the product itself. Let's assume we're doing whatever we're doing to make sure that we're manufacturing that to the best prices we can. Once that product has been manufactured, we still have to get it to the consumer. There's a lot of things we can do to make sure that we're being even more impactful and efficient in that. It's looking at our freight cost. It's looking at also how we can consolidate certain shipments, direct to customer shipments. All those sort of things have a massive impact on the cost of supplying the product. There are opportunities there that we wish to pursue. Next example, workforce planning. This does not mean cutting workforce.
What this means is making sure through intelligently understanding what our needs are for resources, that we have those resources allocated correctly. That we have the right people with the right skill sets, obviously, in the right place at the right time to do what we need to do. That is continuing to ensure investment, as Kasper said, in the talent that we need in this organization, growing that talent also internally, but anticipating better than we probably have done in the past, where we need that talent and when we need that talent so that we can be more efficient in this here. That's not just a story about working with the internal resources. It's also managing in a more sophisticated way the external resources.
There are a lot of external resources we use also around the world, and we need to be clear about why we are using them. Final point in terms of an example of the efficiencies that we can gain under the One adidas initiatives. It's also the real estate area. We're obviously a global organization, and we have locations all around the world. That's going to continue. Our efforts here do not suggest in any way that we're on a path to close particular locations. We do want to look at the locations that we have and identify where we can be even more efficient with them, where we can put the various parts of the organization, perhaps more effectively together in common locations or where we can even be more efficient in the locations that we have at the moment.
Space optimization is also key to this, and that means introducing into a lot of our office complexes a more sophisticated office setup where we have shared spaces such as we're experimenting with here on this campus in what we call the Pitch building just over to the right. Each of those various stepping stones together, obviously, with all of the initiatives that we have under Creating the New, some of the choices that Eric called out. All of those in some way or another are necessary for us to increase our profitability. There's a lot there, ladies and gentlemen. I'm not putting a specific figure on each of these, although internally we have obviously clear guidelines as to what our expectations are here. You should just take away from this chart that we've got a lot of parts that can very definitely increase our profitability.
Taking us from this 7.7% that we've just announced in 2016 through to our ambition of that 11% by 2020. All of that fits in very nicely, again, to the economic model. It's that focus and the confidence you need to have that growth is not just gonna be growth, that growth is going to drive that margin expansion, and we will get that leverage into the bottom line. If I put it a little bit differently, and perhaps a bit more pictorially, we have on the left-hand side, again, those stepping stones or those areas where we're expecting to improve our profitability. Look as an example on the right-hand side, some of those initiatives. You've got through brand leadership and ROMI, which is the return on marketing investment.
Through range efficiency as a concept that goes across all of that, which Eric has spoken about, not just taking the 25% out of the models that we were talking about at the beginning of Creating the New, but also going further and ratcheting that up as he said. Some of the initiatives that I've just talked about, like GBS and procurement, all of those feed into profitability enhancements that are not just operating overhead improvements. Sure, we're going to improve our operating overheads. Sure, we're also, however, going to get better leverage, as Eric was talking about, of our further investment in marketing working budget. A lot of these initiatives, however, also improve our gross margin.
It's all three of those things that are going to ensure that we drive the profitability of this group to that double-digit figure. If I put that together, this slide is no news to you obviously, good news is always worth repeating. We have gone from the initial ambition of 2020, with the high single-digit top-line growth and a 15% CAGR on the net income, now to that 10%-12% and that 20%-22% net income CAGR. Kasper called it out. He said that implies 25-27 of top line, it implies that 11% of margin. Kasper also said that we are at the start, I think he said we're 6 miles into the marathon. We're at the start of this journey, ladies and gentlemen.
As much as we are extremely optimistic about the plans that we're sharing, the updated plans we're sharing with you today, we still have a long way to go. If you look at this, not just in terms of the percentage of completion, look at it in cold, hard numbers. We're looking here at EUR 6 billion-EUR 7 billion increased top lines still to come. We have competitors that dream about their total business being at some stage EUR 5 billion, EUR 6 billion. We're going to add that in the next four years to our existing business. That is no given, easy feat, we're confident about it, we still got to deliver on it. That's why Kasper said, we're focused on everything in the moment to 2020. Is there life after 2020? Of course, there is. Let's get firstly to 2020. Operating margin.
We got to deliver 3.3 percentage points more than we've got at the moment. There's a lot of reasons we've just shared with you as to why we're confident about doing that. Obviously, e-com, particularly because of that significant profitability uplift that growing e-com gives us, is a key to this plan. Here, yes, we're very confident about EUR 4 billion. Look at the rate of growth that we're enjoying at the moment. That still means a whole EUR 3 billion to deliver over the next four years. Ladies and gentlemen, profitability, leverage, these are important for us, we are delivering on this. I'll come back to that in a minute, I want to take a couple of minutes out just to talk about balance sheet, because it's something that CFOs do.
If we look at capital expenditure, it surprised me a little bit, a lot of the questions I got after the announcement last week of 2016 and particularly the 2017 outlook, was all about CapEx. I took that to mean we had no other questions. Anyhow, in terms of CapEx, yes, CapEx is increasing for 2017. I said two years ago that we should have a CapEx over the next few years of about 3.5%-4.5% of sales. I want to confirm that to you again today. That's that bulk, that bar, sorry, that you can see on the chart here. Are we over that in 2017? Yes, we are. We're over it for deliberate reasons. About 50% of what we are investing in in 2017 is on improvements in our controlled space.
It is investing in our retail network and refurbishing with a lot of the concepts that we now have found to be really working with our consumers. That is good for our business, and we will obviously continue to invest in that. Bit of an uptick in 2017. Largely, however, because also in 2017, we have significant investments in our warehousing, something over EUR 150 million. Also on headquarter building projects. You've seen the cranes, hopefully, here on this site here, there's something over EUR 150 million coming also in 2017 for that. Last point on this chart, also by no means the least important, in terms of money, it's probably a little bit less. Significant uptick also in our IT and infrastructure spending in terms of digital capabilities. Kasper called it out.
Everything we do in this company is also influenced now by digital, therefore, we need to continue to invest to make sure we can be best also in digital. Second balance sheet point, operating working capital. Operating working capital, I said, yes, I'm confident to be around about the 20%. I said that, however, at the stage we were 22.4%. We've delivered on that, I'm very confident that we'll continue to be able to deliver on that. Is more in the bag? Maybe. I think around that 20% is a very healthy position for the company to be at. Obviously, if we can get better, the guys will try and do so. Finally, shareholder returns. Here, I'm only concentrating on the dividend. Clearly, there's more to shareholder return, in terms of the dividend here.
You will recall that in 2014, we changed our payout ratio from the 20%-40%, that sort of light red bar on the left. We changed it to 30%-50%. At the same time, we significantly increased the dividend at that year for reasons that I'm sure you all remember. It is very clear that we want a sustainable dividend between the 30% and 50%, with our proposal for 2016 at the 39.6%, we're back in the space again, that I think is the guidance I would leave you with for the rest of the years for dividend payout. Before I wrap this up, I want to come to something that's, I hope, important to you.
It's very important to me, that is why are we different now and why do not only I but my colleagues talk so enthusiastically about the deliverability of the profit improvement over the next few years? I think it's important, particularly for me, to say, yes, we have learned a lot. I really believed in Route 2015. We called out a couple of numbers in 2010. We said we want to have a EUR 17 billion top line, we definitely also wanted to have an 11% bottom line. We didn't deliver on it for various reasons, which I won't bore you with again today. I think, however, one of the key learnings as to why we didn't deliver on that was we were looking very much still in those days at the business from a silo basis.
We were optimizing many things, but we were optimizing them within a silo. We were still very much market driven. This whole concept of brand leadership has only really come end of 2013, implemented, as Eric recalled, end of 2014. Brand leadership with this clarity of positioning and also this clarity of looking at what is it that the consumer wants and how do we service that consumer from an end-to-end point of view, taking us out of our silos, forcing us to look at things cross-functionally. Forcing us to understand that just my area is a part of the solution. It is, however, not the solution. We need things left and right also. I think is one of the key reasons why we're very different now and why we've learned from some of the situations in the past. We also have very clear objectives.
Underlined this time, however, with specific deliverables that are broken down into bite-sized pieces that people know what they have to do, what their particular role is in doing that. All of that comes together in a plan that both Kasper and Eric have given particular credibility to today, I think, in terms of why this is coming together. At the end of the day, the plan is a plan until you execute it. I suggest to you that not just because of what you've seen in the last couple of years of real performance, but also from the credibility of the initiatives that my colleagues and I are sharing with you today, that we are definitely executing on this. Yep, there's still a long way to go, but we're executing on it.
That's why I think you should be very confident that we know why we can be different than what we have been in the past. Being different to the past also means not just focusing on the profitability or a number, but recognizing that our long-term sustainable success is going to be determined, measured by different stakeholders. You are obviously one of our most important stakeholders. You, however, will not be satisfied if we do not have a sustainable long-term business model that continues to improve our profitability and therefore enables us to improve returns to shareholders. That has to be built on more than just numbers. It has to be built on what Eric was talking about, that credibility as a company, credibility as a brand. That's why if we're serious about this, we need to measure more than just growth and profitability.
We also need to measure what our consumers think about us, what they think about us today, and not just then go away, but measure it all the time, have that regular dialogue with it, and make sure that this is part of our decision making. We also need to make sure that our employees are engaged with what we're doing, that they're excited and motivated by what we're doing, that the culture is right for us to be able to deliver on the objectives that we have. We also need to be extremely credible with our efforts in sustainability. I would put it a little bit broader and say it's actually a corporate, social, and environmental responsibility here, and we want to measure that, and we want to be true to that.
We believe that by doing so, that will also feed in to the growth and the leverage opportunities. Getting those interests of different stakeholders in a form that's balanced, in a way that enables us to make the right decisions, to do the right trade-offs, that's part of the secret of what we believe will deliver our success in the future. It has to be credible, it has to be sustainable, and that's what we're measuring. That's why we believe that if we look at that holistically, as I told you two years ago, we will introduce our view of how we measure things holistically, we call it integrated performance management. If we do all that, we can be really confident that we are creating value. If I sum this up in my terms, we have a plan that clearly is focused on the consumer.
It's focused on creating, generating, enhancing, driving this whole brand desirability. The economic model says that if we drive brand desirability, we definitely also grow our top line, we grow market share, and that goes down into improved profitability through that higher leverage. That enables us to be in a position where we can increase shareholders' returns, all on the understanding, as I mentioned one minute ago, that we look at this end-to-end and long-term. Take that holistic approach, through that holistic approach that go beyond just the pure financials, I can be confident that this is not just Creating the New the plan, this is Creating the New creating value. Thank you for your attention, ladies and gentlemen. We now invite you all for questions and answers.
I can already see that we have quite a few questions there. I would ask you for one minute until we find Eric, who's also going to join us here. Then I would ask you to wait until you have a mic so that not only we here in the room can hear your questions, but also the people following us through the webcast. Okay. Should we start there, Sophie?
Like a professional actor.
Maybe you can mention your name and the firm you're with so that everybody knows who you are.
Good afternoon. Sophie Park from Bank of America Merrill Lynch.
Yes. I love this crowd.
Just one quick question from me. You've set a clear target for sales within the U.S. Can you give us a bit more color about how you expect that to be made up of volume and price, especially in light of how well your higher price point product is doing in the U.S.? I guess within that, in terms of margin expansion and given your renewed guidance, how should we think about margin expansion in the U.S., given that it's a drag versus most of the rest of the world?
Well,
Okay
I'll do the margin expansion. You'll do the price volume. 3.5% was last year, 6.5 previous year, 6.5 was last year. It's clearly dilutive. We have a long-term position in the U.S. and that's why we went out also actually from a guidance standpoint, looked upon and said the primary KPI is EPS, it is not margin. We want to build the maximum value that we can in the U.S. and not try to optimize margin in the short term in order to get there. You'll see a consistent expansion of the margin. Whether it'll be dilutive by 2020, we don't want to make a statement around. What we want to make certain is that the absolute value contribution we get out of the U.S., we maximize that rather than maximizing the margin of it. We have a target, but we're not disclosing it.
We expect it to be dilutive for a while. We'll continue to be dilutive at least for the next two to three years. Robert, maybe on price point. That's the advantage of being CEO. You take the best part of the question and answer that and leave the more difficult part to the CFO. Okay, that's fine. Look, I think you all appreciate that the American market is a market for our industry where the price points are the most aggressive, I guess. If you look at throughout our industry, the gross margins are 8 to 10 percentage points lower in America than we enjoy outside. That's throughout the industry, our competitors as well. It's not that easy just to increase prices in this market. I think you should assume that the largest part of the growth is definitely volume.
I'm sure Eric would confirm this, that as we're getting more love for the brand, and we are also introducing products at higher price points. We're selling those through because the brand is desirable. Just one quick final point on that is that as part of the success in America, it's also however bringing in product at the right price points because we were quite weak in certain of those sweet spot price points in the past and with some of the technologies such as Tubular and what have you, we've come into the EUR 80-EUR 85 price point, which is enabling us to grow there as well. Volume is over price.
Okay. Antoine Belge over there, please.
Yeah. Hi, it's Antoine Belge at HSBC. I've got a question on controlled space. I remember two years ago, in the 2020 plan, I think controlled space sales were supposed to be growing double digits. I understand that clearly with the e-com new target, that's going to be a strong contributor. I felt that there was less emphasis being put on retail, but more the physical stores. Should we expect some closing and maybe less or fewer store openings compared to your original plan? Which would be the main region mostly affected by that?
Okay. Obviously, every time we get together, we have to adjust and reflect and iterate what we said before. We're not changing the strategy. What we're looking to do from a controlled space standpoint is to invest and make sure we show up as a premium brand. That's the most important thing. From a controlled space, it means that we show up as a top-rate brand. If you're in Western Europe or if you're in the U.S. or some different markets, occasionally, we don't come up as a top-tier brand that we want to. That's where we show up. We need to show up as the creative sports brand, and we need to show up on eye level with our competition. That's job number one. Once we get that done, then we can look to invest in new space going forward.
I don't think we've deviated from any of our controlled space conversations. We're focusing in on the existing spaces we have and making sure we upgrade those as much as possible. E-com, our ambition has gone up dramatically there, so obviously, that would be another area that would fit under "controlled space," and we need to make sure we have that presentation second to none. It needs to be our best store, needs to be the most unbelievable brand experience, and from a consumer standpoint, needs to rise to the standard above our industry and look at the expectations that are being driven from an Amazon to show how we service our consumers and how we interact with our consumers. Those are becoming higher priorities than maybe a robust growth in a number of quantity of D2C brick-and-mortar stores going forward.
It still is all captured within what I would say is controlled space.
Okay. Erinn Murphy here, and then afterwards, Louise Singlehurst, then Cédric from the customer.
That was Robin too.
Thanks. Erinn Murphy, Piper Jaffray. I guess I wanted to focus a little bit more on Boost. Last week, you talked about the supply constraints there. I would love to know more, what would normalized demand look like this year and next year if you could keep up with the demand? I guess the concern I have is that if we have a year or two where the supply is trying to catch up with demand, what prevents your competition from maybe awakening and trying to dig into that performance space? How confident are you in the 2017, 2018 pipeline to really support growth elsewhere in your business? Thanks.
He asked me one question. I'll ask you one supply.
Okay. Good deal.
If you look upon the overall supply situation, it's a moving target we're speaking against because every time we have a quarter, the demand is up. The more we work and the more supply we get on, the more the demand goes up. I think that if you look upon the two scenarios, oversupply and over-demand and lack of supply, or lack of supply and over-demand, it's a better position we're in right now. We'll continue to have approximately 18-20 months of supply constraints. Whether our competition will come up with something new, I'll ask Eric to comment on the uniqueness of our design. I think that, of course, we have great competitors. They will eventually come up with something. Replacing what we have is not going to be so easy.
We feel quite comfortable with the long opportunity we have from a Boost standpoint. BASF has been outstanding in the way they work with us because this has been a moving target every quarter. Will continue to be in that situation probably for a long period of time. Of course, it also depends on the products we bring to market. Maybe you want to just speak a bit about the Boost within our product range.
Yeah.
I think the world wants more Boost, as do we. BASF is the ones that are trying to produce that. Any product we have with Boost, it sells out overnight. The latest version was the EQT launch. It goes away. It evaporates. That doesn't mean the pairs are staying static. It means the pairs keep coming in. We get more and more every season, as Kasper just said. We will continue to allocate Boost by category, then we allocate it by market based upon our SBP, then we go from there. We also don't treat everybody equal from a category standpoint, from a franchise standpoint, or from a market standpoint. Now not even from a channel standpoint. We have to make sure that we make clear decisions based upon where we get the best bang for our Boost.
There you go.
I'm going to keep that.
There we go.
All right. That's not a joke. I just said that. I'm going to keep that one. All right. From a competitive standpoint, I would just remind you that Boost took us five years to bring to market. 35 years ago, EVA was invented, and that's still the industry standard from a cushioning standpoint. If it were easy, everyone could do it. It's something we have as competitive advantage, but we're not resting, as I'm sure our competition isn't. We continue to look at new opportunities as well that will be coming out in the next months and years. We don't rest on it. We're glad we have it. We maximize it, the opportunity, but we certainly don't stop there. If we did, you guys should ask us why.
Just one point, Eric, if you could comment on. We're not a Boost-only company, just to put in context.
We're not a Boost-only company. What we like from a Boost standpoint is the position it gives us, which is around energy. Everyone wants more energy in their day, in their run, or whatever activity you're doing. We've taken that, and we've looked at different compounds as takedowns from Boost. We've got it in Bounce, which we have out in the marketplace right now with Alphabounce, which is a very successful franchise in running at that $100 sweet spot that Robin was just talking about. It was actually designed in the U.S. and really goes after that runner that's training for sport. Then underneath that, even with what we call our Cloudfoam. We start to make derivatives of Boost through EVA compounds and mixtures that come underneath that. Boost is not our only trick.
It's our lead dog to try to really tell stories to the consumer that are more than just the industry standards.
Okay. Now we have Louise, if you can then pass on the mic right next to your neighbor to the right, Cédric.
Hi there. Good afternoon. It's Louise Singlehurst from Morgan Stanley. Just a quick one question for Kasper, if I may. We've heard a lot about building a scalable enterprise. We've heard a lot about automation. We heard earlier from Eric that the industry is very backwards looking in terms of futures orders and how you've got to Creating the New, as you say. What are the benchmarks, of course, you talked about accountability as well. What are the benchmarks in the other consumer companies that you're really looking at in terms of industry standards? Beyond the sports arena, if you like.
I answered in two areas. I think when you look upon benchmarks, one should look upon benchmarks within each function area and figure out who is best. Go beyond the industry and say, who's best in purchasing, who's best in IT, who's best in digital? Instead of trying to look for a company, you actually look for one area. One of the things I learned from my past life was identify the gap and close the gap. Get very specific on different areas and try to see how you can close it. If you look upon the scaling within our model, I think that because it's important to start where what we have under control is, we have built a model where we have high correlation between top line and headcount.
What we need to do is we need to make sure that we only make one decision once and one solution once and make use of that. We don't have best practice sharing, we have best practice implementation. That's a cultural difference in our company and something we need to evolve to because we came from everything is done locally. Eric's school was probably the first group that really took a true global view, you got to get down and do that in finance and HR and purchasing, just one by one by one. That's where you get the scaling in, because it's not that we don't have the solution. Too many times we have the same solution. Making sure that everybody understands that team play means that you're actually passing the ball, you're not trying to do everything yourself.
The industry has shown irrespective of us or other industries, that you're more than capable of building and scaling. Probably the most extreme scaling is through technology and through standardized and automated infrastructure. Digital, if you want to call it that way. One of my partners, Zalando, nobody thought they would make money. Now they're making money. Amazon doing the same. A beer company, which is very different, outstanding margins because you get end-to-end view on what you're doing.
Cédric?
I have a question on speed, actually, and maybe addressed to Kasper for the organization and with a consequence for Robin. You mentioned this 25% already impacted by speed. You gave the interesting example of Tubular with reordering increasing very fast. That's maybe also for you. What is changing, really? What exactly is this target of having 50% of products on speed on 2020? Could you maybe help us illustrate a little bit what's happening inside the organization to reach that? The consequence may be for Robin. You mentioned working capital stable going forward as percentage of sales. How can you be faster and have the same working capital ratios? Thank you.
From a speed standpoint, without going through in great detail, many companies have built a speed model for apparel. Footwear is a different story. It's a much more complex product to create. You have to change everything from how you design to what you design to how you build materials up to share between multiple silhouettes, and then how you read and react to those products, whether it be plan responsiveness or whether it be in-season creation, or whether it be never out of stock. There's some similarities, but they're different discrete models based upon the market and the opportunity we have. To me, the 50% number, the 25% number is enabled. That's the key word. It doesn't mean we're going to do 25% products on speed in the future.
It means we have the ability through how we've created them to enable speed, whether it be, again, in-season creation or plan responsiveness or never out of stock. That's a key differentiator because not every shoe is going to be required to backfill and not every product right now is not going to be bought to the level of the example of Tubular Shadow that we can chase through plan responsiveness. It gives us that opportunity to strike. That's the key difference. Our 50% goal is to enable 50% of the models that we bring out are enabled for speed, which means we can chase 50% or plan for 50% business that we don't have in backlogs today.
In terms of the working capital, I hope you were meaning why aren't we going below the 20% and not why is it going up. I think there is opportunity to go below because this by no means means through speed that we have to commit to more inventory. In fact, the opposite is true. Even if we might be making some commitments with tier 2 suppliers for some of the materials, which we're trying to avoid, obviously, the whole concept of speed allows us to be creating product when we think there is the demand for it. Keeping it less in our, sorry, shorter time period in our business. The old model that Eric referred to earlier, we're buying a lot of product that we then push in through our organization and hope the consumers buy it.
There is opportunity to improve our working capital, but it's definitely not, it's gone that way, not the other way.
Okay.
Why don't you target something more aggressive than that?
I'm sure my successor will be happy to target something more aggressive at some stage. I think maybe to be transparent on this is we're very transparent on what are some of the key targets we're communicating to you. Of course, we'll look upon across organizations and look upon audiences, other things we can do better and figure out how we get there. You got to do it in a sustainable way, and we need to make sure that we don't set 15 priorities out there because you get 15 out, and you won't get them. What are the three or four that are really important? How do you stack rank those to make sure that we hit those? Of course, we'll look upon across the organization, how do we become a better company? There's no doubt that will happen.
We will continue with Chiara. We obviously also try to be efficient. If Chiara could just pass on the mic to Fred, afterwards Jürgen in the row behind that.
Thank you. Good morning. Chiara Battistini from JPMorgan. A couple of questions, please. One on Reebok. You mentioned that it's going to take time to turn it around. How long are you going to give it to Reebok? Maybe if you could also give us more color on the KPIs you're measuring the Reebok team on. On the 2020 targets by division, I remember a couple of years ago you gave us targets on running and Originals specifically. Clearly, especially on Originals, you've clearly surpassed yourself. Maybe if you could give us updated targets there, please. Thank you.
On Reebok, it's a multi-year plan we have in place. What we look upon is very similar to the same KPIs as we have for the entire company. It's NPS, it's market share, it's margin, it's growth. We've defined targets, we build a roadmap around that. That is a multi-year target. I think you asked one more about Reebok.
No, how many-
It's a multi-year target. Of course, I want to be clear on Reebok, but it goes for everything. We have set ourselves targets as a company in what's acceptable performance. If you were to remove the name Reebok, that applies to the entire organization, what we're speaking about. What kind of contribution do we need to get out of the different entities we have or brands? I spoke about that in the portfolio. We're very clear on it. It doesn't mean that if somebody goes below, then you're on the block, but it means that if something goes below what's acceptable, there is an action plan that will be executed upon. There's accountability for how we execute it. I think that's extremely important that we do that.
Fred. Sorry.
Go ahead. On the second part.
As far as the targets for the categories go, I think Eric summarized these wonderfully in terms of lead, grow, and authenticate. They are still exactly how we see our categories. The growth we're enjoying is through this broad brush, but there's nothing specific that I would call out unless you want to add anything.
Thank you.
Hi. It's Fred Spiess from UBS. Just a couple of questions on China, please. It seems like there's a pretty big ramp-up in directly controlled distribution. Just interested on, is that just to get closer to consumer, or are you also seeing any changes in the market dynamics there? As a follow-up on China, how are you feeling about adidas NEO in China at the moment? How do you think about the balance of growth between NEO and everything else at adidas through to 2020? Thank you.
I'll do the first part. Eric will do the NEO part. Yes to the first part. We want to get closer to the consumer. The one big change that you have happening in China right now, that the Chinese e-com market is predominantly driven by the Alibabas and the Tencents of this world. You're going to see a change to the market where they'll, of course, quote-unquote, be the big elephant in the room, but we will need to have a much more direct engagement online with the consumer in the future than we've had in the past. That's, again, make certain from a priority standpoint, we do the right things. Went HAM to global e-commerce five years ago, it was zero, or six years ago.
I think that the success has shown it to be right, that we focused on fewer markets, doing them one by one. The time has now come to China, where the predominant e-com engagement with our consumer has been through our partners. Now we need to do both.
I think as far as NEO is concerned, NEO's been a great weapon of ours because if China, the brick-and-mortar game is about retail formats and how you can continue to drive your retail format from a comp growth standpoint, but also from a growth standpoint into multiple cities as you go in. NEO was a weapon for us to go into lower-tier cities, but also was a differentiating factor in some of the higher-tier cities to our Originals or a Badge of Sport store. It gave us a third leverage angle. Nothing's changed. We continue to use it that way. We will look to do things around Core a little differently, maybe put some more product in that store for more of the Core range. Specifically, I'm talking about footwear.
We continue to make NEO apparel for those stores, those stores only in China because we've got 3,000 points of sale right now that we need to continue to grow there. From a China standpoint, it still gives us great options and great leverage to have a landlord negotiation or to get into a lower-tier price point conversation with the consumer.
Okay. Jürgen Kolb from Kepler Cheuvreux. Real quick, three questions. First one for Eric. I think interestingly, you talked about the product life cycle management. I was wondering if you could go maybe a little bit more into detail here, especially how detailed is that life cycle management? Is it on a regional basis? Is it on an even country basis? Where are we specifically, I think this question has come up in a smaller group question, on Superstar and Stan Smith specifically by region. I think if I remember correctly, there was one time 50 million pairs or so you sold with the two franchises if I'm not mistaken. Where are we currently here from this respect? Secondly, a very easy one for Robin.
If we go to the 11% margin 2020, gross margin and OpEx, which will be the biggest driver you think that you could manage here? Lastly, the design lab, the new one in Brooklyn, is that now fully operational and fully contributing also to your entire product development cycle? Thank you.
I guess I'll pick up the first and the third right away. From a first standpoint, through the brand leadership model, we've empowered our guys to go through, and that includes a distribution conversation. They have partners in the markets. Go-to-market partners in every one of the nine markets we have that interact with them on a regular, daily, hourly basis. Yes, I would say the granularity of the franchise plans through a life cycle planning, when we go in, how we incubate, how we iterate, how we commercialize, and how we phase down is done at a model franchise level, right? That is done by market. Obviously, not everyone's equal. We have our big three markets that are really driving a lot of the demand and the volume, as Robin pointed out.
China, Western Europe, and the U.S. are primarily driving some of those decisions. If we have a trade-off where we have to decide what month is the best month to intro, it's usually a negotiation between Western Europe and the U.S. because they can't seem to get along, not even in politics nor in franchise introduction. Sorry, make a contemporary joke. Anyway, I think that answers your question. Superstar and Stan Smith, I prefer not to comment on that. Listen, it's on a regular life cycle. It's not at the incubation stage. I'll let you guys determine the other 2 stages it could be in. I don't want to get into those numbers knowing that this is shared to externals as well.
Maybe hold it there. Just to put the number into context, you mentioned a number of 15 million. How many pairs of footwear shoes did we sell?
300 million.
EUR 350 million. It might decline or it might grow, EUR 15 million in the context of EUR 300 plus is really, that's in the context we have to see.
What I would say is we don't see any slowdown in our backlogs on Originals. What we're doing is we're able to replace those. Again, going back to my presentation, I was pretty clear about how we build our franchises and our portfolio within the Originals Trefoil sub-brand. Brooklyn Creator Farm is open for business. The guys have been employed now for close to a year, and we've been in temporary locations. We're now in permanent locations. It is cranking out and is a big driver of our open source and what comes next. I'm very bullish on what they're producing and how they're interacting to bring the new to life.
Very simple, easy answer to the easy question. We're expecting growth in both so that we would have an improvement in the gross margin and a reduction or leverage through the operating overheads. You could also work out which is which.
Hi, it's Simon Owen at Credit Suisse. Two quick questions.
Yeah.
Going back to China, do you still stick by the ambition of 12,000 points of distribution? As you push into lower tier cities, are you having to change the price points-
No
to achieve that aim within China? Just to follow up on direct distribution. Presumably collect at store is going to be a reasonably large part of your ambition within that EUR 4 billion target. How much do you need to do to the infrastructure of the business to be able to, say, do one-hour collect at store through most of your DOS operations, if that's, say, an ambition by 2020?
First part of the question, in terms of China, yes, we're continuing to grow our retail footprint in China through franchisees, however. Although we may have an increase in our own, most of this is, as you understand, about 10,000 franchisee shops at the moment. What's important here to understand, about 500 net openings a year. Yes, there are more in the lower tier cities, it's not a price point thing. It's more a mix. There will be people in those lower tier cities that also want the high price product. You just wouldn't sell as many of them, so the product mix might be a bit different, it's definitely not taking price points separately in the lower tiers to what we have in the high tiers.
What you're finding now in the more mature part of the higher tier cities is perhaps the closures and openings of what were previously smaller locations to now bigger locations. The footprint or the sq m is also growing.
On the question regarding pickup in store out of the EUR 4 billion, we've not broken that down, or we have, but we're not disclosing a target. I think it's fair to say that we'll be investing several hundred EUR million over the coming years in building infrastructure, and it's infrastructure in several areas. It's process standardization end-to-end. It's systems that allow this to take place. Of course, it's physical infrastructure, so it's warehousing because it's a big difference whether you ship in bulk to a wholesaler or you ship a pair of socks to an outlet. We need to build a parallel infrastructure in order to make certain that we'd actually supply that demand from the consumer. Most it will be probably done by us, but we're looking upon to which extent it is build versus 3P.
You'll see several hundred EUR million investments coming over the coming years, and you're already seeing them now. If you were to go to mid-Germany, you'll see we're building a huge distribution center to serve our direct accounts or consumers here in Europe.
Okay, now we have John Guy here in the first row. We have Omar Saad and Piral over there. Simon, if you may be able to pass down the mic again.
Who is it? The guy with the tie?
Yeah, John.
Great.
Thanks very much.
The one.
Probably the only one.
No, no. It's fine.
Two questions, please. The first is around gross margin 2017 targets, up to 50 basis points of growth. Maybe just flash back to 2016 and the amount of headwinds that you were able to negate. If you're looking and including commodity costs and wage inflation this year, on my estimates, you're looking at maybe 100 basis points of margin headwind. The hedging is negligible or relatively neutral this year. When you think about how much margin you need to reinvest in the business in order to drive sustainable top-line growth, it seems to me that you would be investing quite a lot of potential margin opportunity in 2017 if your gross margin guidance is only up 50, having done a pretty strong margin opportunity in 2016. Could you comment on that to start with? My second question is just around store concepts.
You talked around the Stadium concept as the new concept in the U.S. When we think about productivity or sales within your D2C network relative to peers, they're still reasonably low. Are we going to talk about when you're cleaning up the existing store base, are you going to go smaller, come up with, I guess, new innovative ways to maybe engage with the consumer within a store base, think about lighter working capital in the store, thinking about maybe more digital enhancement in the store, to try and rather than ram product down consumers' throat, engage in a slightly different way?
Maybe you could talk around how that new store concept will evolve. Thanks.
Gross margin, three points. Firstly, there are still headwinds in 2017, although they're less than we had in 2016 because the hedge rate although inferior in 2017 over 2016, not as bad as 2016 over 2015. That's correct. Second point is that we will still benefit from mix. We still expect some of the channels to grow faster than others, particularly the e-com channel. We're getting better, as Eric has also explained, in the product and the price points and what have you, and the sell-throughs. The third point, I think, is relevant for you here, and that is we did a tremendous amount of price increases in the last two seasons through 2016. It is not our intention to do that, or we have not done it in 2017. There will be certain areas that we can adjust.
Don't expect that just what we did in 2016, we do again in 2017. I don't think that's appropriate in this marketplace.
From a store format standpoint, you're absolutely right. We're getting out of the transactional store brief, if you will. We want to get much more into a storytelling environment. Doesn't mean we won't trade as well. It means we'll trade better. It means we'll have more top line, more bottom line, and more NPS scores than ever before. That's what we're seeing when we pilot things like Fifth Avenue. To me, it's about cleaning up our store fleet as quickly as possible, which is why we talk about committing money into some of the CapEx into the remodels versus the growth of the fleet. Really looking at how we can grow that up from a wholesale standpoint. Also remodel that from a wholesale and also remodel from our own fleet.
We will be looking to close the ones that we don't think are valuable, but we'll also be looking to keep the ones we have, but make them richer, make them a better experience for the consumer. We use all the tools available, whether it be digital tools, whether it be service, just better service. People make such a big difference. In Fifth Avenue, for example, our NPS score is at 92 right now. Apple's three blocks away, 85. That's a very clear indicator, and we've done things with a consumer experience team that sits next to the sales staff. We've over-invested to experiment with some of these things, and I think that's the way people want to interact in the shopping environment. We have to make sure when we show up in a brick-and-mortar environment, that it's worth your time coming in as a consumer.
Otherwise, you're just going to click at home and have it delivered to your door. Why do people come out and shop anymore? I think those are all questions that are coming through as we explore that.
Does that mean that your size of the stores in the U.S. are going to be smaller going forward? I mean, in your plans for expansion?
Yeah. Sorry, the question was, does that mean our stores in the U.S. are going to get smaller? Our store footprint in the U.S. is tiny anyway, from a number of stores standpoint. We will evaluate each store on a case-by-case situation and say, "Do we need a bigger store?" I'd say in L.A., yeah, we need a bigger, better. We need to redo the whole Santa Monica experience. If you talk about in Jersey, we may say, "Hey, you know what? Let's close a couple of these and double down on some of our wholesale partners." Those are case-by-case decisions that will be made in-market.
Okay, we have time for two more questions. Omar and Piral, please.
Thank you. It's Omar Saad from Evercore ISI. My first question, I want to ask about digital and e-commerce. It seems like the area where you changed the 2020 plan the most, and there was the biggest kind of increase in your expectation, basically quadrupling from now until 2020. What did you see in that business that gave you the confidence to really make that kind of change in the trajectory in your underlying assumptions? Are you allocating product differently to that channel to drive traffic there? What are the changes you've made that allow you to get to that goal? My second question is really for Kasper. You've talked about culture a lot on the conference call today.
What are the biggest areas of opportunity as you look at the culture of this company that you see from the way things kind of used to be run and operated and where you think there's a lot of room for improvement there as well culturally? Thanks.
You'll start. If you do the digital one, I'll do the cultural one.
Sure. I think based on our growth projections right now as a company, we see the growth opportunity from an absolute standpoint. What we said to ourselves was, why don't we want to have that in our best store in the world? Why don't we want to start to own that? It also comes down into a channel mix, and when you start to look at your profitability indexes and how you can be more profitable, it starts to be a pretty easy exercise. I think also, credit to Kasper. He's brought in a very rigorous, let's call it, digital agenda that we need to be driving throughout the company, and I think we've all embraced that, and we wanted to give ourselves an ambition that matched that.
Yes, we'll have to look at everything from how we do business, what the content we create for e-commerce, and how we allocate product. Of course, all those things will have to be in line to support the ambitious growth we have.
On the cultural element, I'll probably comment less on the past and more on the future because I think that's the more appropriate way of doing it. First of all, I want to say very clearly, we have a fantastic employee base. We have great talent. The foundation we have is unbelievable. Eric just spoke about digital. There's no other company with average age of 30. There's no other company that has a better starting point than we have. Culture also means, and I'll speak a couple of points, is that you pass the ball, you trust your colleague. Eric is here to do his job. Robin is here to do his. I'm here to do mine. We can't try to do each other's jobs. We've got to trust that each person is doing his or her job.
I think in the decentralized structure, people tend to say, "This is mine." Then you read it, the work many times. Instead of saying, "You're the guy to do this, you do it," and then you pass on the ball to me. One is being very clear on this is a team sport and everybody has his or her role to play. I think it's an extremely important part.
Two is being very clear on what's good is not good. Not good is not bad in itself, but if we can't articulate what's not good to you guys, we can't articulate what the upside is because the not good is the upside. The Reebok is the upside, the U.S. is the upside in the context of not good. Speed, not enable speed is the upside. Being very clear on what is not good, and then thirdly, be very disciplined around execution. If we say something, we do it. If not, we don't do it. Right now we have had, and I mean this with great respect, we've had enough strategy. We have a great strategy with Creating the New. It's execution time. I think getting those things right is immensely important to create what I call really a winning culture.
Lastly is, if people do a good job, you've got to pay them. You got to pay people to do a good job. If they don't, you don't. It goes for everybody. Everybody's in the same boat. That's why the link up to equity for key performance is essential. It is. I'll do the other way around. It's not good for a company if the stock price goes from 70 to 170, hardly anybody of the key leaders benefit from that value creation. For you as investor, there's no tie in. Your interest is you want to make sure that we have the right people at the right place with the right mindset, they'll be there in 4 years' time. In 4 years' time, we have the next plan.
I don't think we've been good enough of tying success of our company to the success of our people, also monetary. I'm not speaking about getting somebody to get another television. I'm speaking if somebody does an outstanding job over 4 years' time, it has to have a fundamental impact of that person's financial situation. I think culturally, that's a bit of the things that we need to get through. Understand, it's not Eric's people or it's not Robin's people or my people. The 150 people are our people. They will make the difference. If we get the right people, they will make the difference to our company. There's no doubt. If we don't, they will not. You will be angry at all of the three of us. Maybe less at Robin, but more at Harm.
Last question from Piral, please.
Thank you very much. Piral Dadhania from RBC Capital Markets. If I could just focus on North America and that EUR 5 billion sales target you have, could you just help us understand what the contribution from each of the verticals will be? Obviously, Originals has been a key driving force in the last year or two. Going forward, could you just help us understand how basketball and some of the other franchises play into that target? Secondly, just on the controlled space in North America as well, we were here two years ago, you guys were highlighting that a lot of work needed to be done in terms of your point of sale investment and working with your wholesale partners in North America. I think some of the strength in the last few years has stemmed from that investment.
Could you just help us understand how much has been done and how much still needs to be done in terms of investment in your point of sale with partners such as Dick's? Thank you.
Since it's your last day here, Robin, at this stage, you should take the first question because it's the most difficult one. Yes. I should have paid attention. Yes. I'll answer you.
Can't agree more.
Of the EUR 5 billion, This was clearly not a question for me. Of the EUR 5 billion, we don't break it down. Of course, we do expect a contribution for all parts, but we simply don't break it down. That's for competitive reasons. Also where we are, you can't expect that we're not satisfied with the situation that we are in. We expect growth contribution from everything in there, probably with a different profile, which we won't disclose to you. On the controlled space, Eric?
Yeah, from a controlled space standpoint, we have absolutely committed resource after resource for the past couple of years into the U.S. You see that when you go to 34th Street on Foot Locker, or you see that in Fifth Avenue, or you see that in the Foot Locker fleet. We've got different shop in shops built up. We've committed to, I think, there's 200 doors, 400 pads at Dick's Sporting Goods that have been redone. We are committing more and more funds into making our wholesale presentation rise to that eye-to-eye level I talked about earlier. Where we can't be eye-to-eye level, we'll have a different conversation. If we either can get there or we won't be in that store. That's a clear decision. We're going to continue to commit to the partners that want us to commit.
The good news is all the key ones do. All the key ones are lining up to really offer us the space and the partnership that we require to build our brand to be more premium in the U.S.
Okay. Thanks very much, Eric. Thanks very much, Kasper. Thanks very much, Robin. That actually concludes our Q&A session.
Thank you.
Before you all head out, let me quickly thank you, and then I'll also hand over to Kasper for some closing remarks. Thanks very much to all of you for this record attendance. We're not only talking about record sales and record earnings, but also record attendance for this Investor Day. We really appreciate the effort that you made. I know we had people from the West Coast, from the East Coast, even from Asia, traveling here. I guess we all know that Herzo is not necessarily the center of all, but you finally get here, and I think you all experienced that it is worth the travel and that Herzo has quite a bit to offer. Thanks very much for coming.
I know that there are probably tons of questions open, Christian, Jenny, the IR team, will be, of course, available over the next couple of hours, days, and weeks to answer all of those questions. We'll also be on the road in Europe, in the U.S., also in Asia, to see as many of you as possible. I guess, we will all hear back at the beginning of May for our Q1 results and then the AGM. With that, I look forward to seeing you again soon. Safe travels, and over to Kasper.
Thank you very much, Sebastian. To everybody, thank you very much for coming. I hope you can see that we have a solid plan in place. We have our strategy, we also have the acceleration points, which have been very clearly articulated. However, we have four years ahead of us. Of course, we don't have a plan for everything we want to do because that would articulate that we wouldn't get any new ideas over the next four years. We believe we understand where we want to take the company. We have a very clear strategy. We have a clear set of targets that will drive also the priorities. When you do this, it's important that we don't get internally focused, and I think that's the danger.
We need to make sure that we have the external focus to be obsessed with the consumer, take item by item in a prioritized way based on what creates most value and execute upon those along what we told you today. Of course, built from the strategy, also taken from the acceleration plan. If you look upon, we are an extremely attractive industry. Look upon where I came from, 3%-4% growth was great. Now we're an industry where we can actually deliver double-digit growth, which gives us huge scaling opportunity. Creating the New is a very good strategy. That's why I said with great respect two minutes ago, it's not about creating a new strategy, it's about taking what we have and being very focused on making certain it happens. We had a great platform in 2016, exceptional results.
We also said, or I said in November, "Don't expect the 2017 like 2016," and some of you didn't like that, but it was in the context of 2016 was an exceptional year. We're not going to have 40% operating income growth this year. Unfortunately, it's not going to happen. We'll continue to deliver very strong results. We believe that 2017 also will be a very good year and a very important platform for 2020. It's not a back-ended plan. It's a very, I would say, staged plan moving forward. We need to make sure that we take the initiatives that we presented here to you today and start executing upon them. A lot of those won't give us any contribution in 2017, but they will in 2018, and they will really do in 2019.
Changing infrastructure, building the e-commerce platform, building the logistics platform that will allow us to get to EUR 4 billion will be a major contributor to the 20%-22% EPS, but will take time to build because these are fundamental changes to our company. If you look upon and say, what is really the essence of what we're trying to do? We want to be obsessed on the consumer, as you heard all the time. We want to continue to show the passion around our brands, because that's actually what drives the entire culture in this company. To make certain that we have the passion in our organization. You heard, when we speak about passing the ball on and respecting each person's role, you heard Eric speak extremely credible about how we create the best brands in the industry.
Get that passion and that creativity into our organization, maintain it, make sure that it thrives, and then be very disciplined about our P&L. Separating the two, we don't want to have a lot of creativity in our P&L. We actually want to have a lot of discipline in the P&L, and we don't want too much discipline in the product creation, but we want to have discipline around how we actually treat the creative products. In essence, obsession about our consumer, passion around our brands and products, and be extremely disciplined about what we're trying to do for the next four years. That discipline might bore you, but that boredom will lead to where we're going to take the company. With this, I'd like to thank everybody for coming.
I can tell you, I'm extremely happy to be here, and I think we're going to have a fantastic ride for the next four years. In 2020, we'll figure out how the next one looks like. Thank you.