Adidas Expands Its Footprint
By Julia Boorstin

(FORTUNE Magazine) – Between selling Salomon, the ski-equipment maker, launching a line of women's gear designed by Stella McCartney, and blanketing China with Adidas shops, it's been a busy year for globetrotting Adidas CEO Herbert Hainer. In early May Hainer traveled to New York to open the company's largest store to date--29,000 square feet of space devoted to shoes and sportswear in Manhattan's SoHo. He stopped by FORTUNE to talk to Julia Boorstin about why skiing hit the rocks, Adidas's Olympian competition against Nike, and shoe-obsessed Americans.

In early May you announced the sale of Adidas's Salomon division, which focuses on winter sports. Aren't skiing and snowboarding popular these days?

Salomon was by far the least profitable of all of Adidas's segments. The ski market has declined dramatically over the past ten years--even snowboarding. Fifteen years ago eight million pairs of skis sold every year; now it's only four million a year, including snowboards. That's for a number of different reasons--the winters aren't as good, ski holidays are quite expensive, and young kids have a lot of alternatives. Look at the ski industry--so many manufacturers are struggling.

Adidas is still the No. 2 sportswear company in the world behind Nike. How's the core brand doing?

The Adidas brand still has a lot of growth potential. In the U.S., Latin America, and Asia we have double-digit growth rates. Today we have 1,500 stores in China, and we're opening another 40 stores every month for the next 40 months. Also, we've been nominated as the official outfitter of the National Olympic Committee in China in 2008, which gives us a tremendous boost with the Chinese consumer. Nike says that it has signed 23 of the 28 teams. Those teams may compete in Nike, but when they're on the podium and part of the ceremony, they're wearing Adidas.

Isn't counterfeiting a big issue there?

We have people going into flea markets, production facilities--working with the authorities--and we confiscate between four million and six million pieces a year. It's the price you pay when you're successful. But we are seeing more help and awareness from Chinese authorities now that China is part of the WTO.

Have you seen changes at Nike since Phil Knight stepped down?

Mr. Knight is still in the building; as long as he's there Mr. Perez will not change direction.

How are the U.S. and European markets different?

In Europe the average customer buys between 1.7 and 1.8 pairs of sports shoes per year. In America it's between six and seven pairs; when you have such high consumption, you never get to the price levels you do in countries with lower consumption.

You have a new line from Stella McCartney. Is high fashion becoming a priority?

From time to time we take fashion designers like Yohji Yamamoto and Stella McCartney to help us because they have real credibility. They don't do everything themselves; they give their inspiration and thoughts, and then five or ten people work to develop products.

How is the A1 microchip shoe doing?

It's doing fantastically. Unlike Nike, Adidas is not used to selling $250 shoes. But we believe the future is intelligent products, and I'm sure our competitors will sooner or later go in the same direction. Even apparel is becoming more technical--no one wears regular cotton anymore. We've also started implementing the "mi adidas" custom-fit shoe technology into all our performance stores. The technology measures your foot with lasers and sensors when you run on a treadmill. You pick colors, and then it's sent to you about two weeks later. And you wouldn't believe the results. My left foot is 26.7 centimeters and my right foot is 26 centimeters. âñ