Bjorn Gulden : Well, the Fear of God thing, I think it’s a good example for working with a partner and not having a clear setup what is expected. I wasn’t part of the first 2 years of this, but I’ve been part of the last year. And I think it’s wrong expectations. And again, not having the layoff is up and actually a lot of misunderstandings of what it means to work on a performance product and then on a lifestyle product with a guy like Jerry Lorenzo. That’s now fine. I mean, as I said, there’s about 42 articles that has landed in the warehouses. This performance product ready to go on the pitch or on the floor. There’s lifestyle product bought in parallel and footwear ready to go. So I think those, what should I say, problems are over.
And now it’s for us to, what should I say, get the heat going and then commercialize it. And from the feedback from retail and also from the fashion show in L.A., it’s been actually very, very positive. When it gets to the order book, I think it’s fair to say that the order book for Adi has been negative and heavily negative for a long time, especially for the second half of this year when we started, there was a terrible order book. And we have been able then to replace that with replenished business and then, of course, also pushing the lifestyle things that has worked and chase the business. Remember, I said we need to fight and we found the things that we could fight with, and I think the team has done a great job. The order book initially for the first half, as I told you ’24 was also negative.
That’s now starting to build to a positive order book. And I expect the order book for the second half of ’24 to be very good, positive. I’m very careful with the order book in the U.S. because the order book there doesn’t really mean anything other than we need to go by account and look at what inventory do they have? And if we give them a positive order book, then we need to make sure that we either have clearance plants or that we take inventory back because it doesn’t help to have a high order book and then deliver into a store that is full of old merchandise. So U.S. is lagging, I would say, 6 months behind the development that we see all over the world, not from a heat on the product, but from an inventory level in general and the amount of discount also on adidas product, but not only adidas.
So again, if I should build a scenario, I think when we end the year, we will have a positive order book globally for Q1, Q2, and we will have a very good positive order book for Q3 and Q4. And then we will see how much we then have to chase on top of that order book. The growth numbers on the 5 shoes I showed you in the presentation is, of course, much, much higher currently than the trend that we have in the order book, and we are actually not taking orders on many of the franchises because we want to manage it. So this is now a course also for us to show that we can be disciplined and not overheat some of the franchises. But again, I’m extremely proud of the team, what they have done for go-to-market for autumn/winter24. The way we have treated the customers, the way we have now done all the pre-lines, the quality of the samples, the amount of samples.
And I think all retailers worldwide will say, wow, the service we feel now from Adi is great. And I think they want to do more business with us, and that was the goal 9 months ago to get there. And then we will have to show that the product we are doing is also selling and knowing that our D2C business in the full price stores is up already like-for-like double digit that gives us a good, what should I say, indication that the right product in the right location with the 3 stripes on our logo works.
Jurgen Kolb : Just a quick one on pricing in the order book. Is there a component of price increase? Or is it rather flat?
Bjorn Gulden : Well, it’s obvious that if you — I think I showed you that the growth in our lifestyle business is in original higher than on sportswear, then it’s obvious that right now, the order book is on a higher price. But that also has to do that we haven’t chased the order book yet on the more commercial side the way we should probably. So right now, I would say that there is a higher demand on the higher product, but that’s not necessarily because the demand is like that from the retail, it’s more the way we have been able to sell it. Any trend we do upstairs, like all the Terrance which also have takedowns we are in this crazy situation that the higher end has much higher orders now than the lower end. And of course, in a normal franchise, that’s not the way it is.
This has more to do with where we are in the cycle. And as you go through next year, I think you will also see that the lower end and the sportswear side will start to grow as we scale up the same silhouettes. So this is more just a view if you look at it right now. But we don’t see average price increasing as much as it currently looks in the order book.
Jurgen Kolb : It’s a nice problem to have the higher price and higher demands.
Bjorn Gulden : Yes. But you would like to do both, right? So there’s a good thing and a bad thing. So it’s like in a perfect world, you would do both and then we will be closer to our 10% EBIT, right? You have to remember where we’re coming from. So it is good right now that all categories have higher demand on the higher price. I agree with you because that’s the same as we have in running. But of course, you need to commercialize it. So there is a job to do to get where we want to go. But Rome was not built in 9 months. So we need a little bit more time.
Operator: The next question comes from the line of Geoff Lowery with Redburn.
Geoff Lowery : Two questions, please. Firstly, can you give us some feel for how many units associated for Terrace, you will have sold in 2023, do you think? And the second one is a slightly bigger picture question. How far are you in getting the wider management team where you want it to be? I don’t know whether you think in terms of top 50, 80, 100 leaders in the business. But how deep and full is the bench right now?
Bjorn Gulden : The Terrace is a millions of pairs. I think I have to be careful with mentioning the exact number because there’s also uncertainty what is Terrace and not Terrace. But the court side will be tens of millions of pairs when you get through 2024. It’s a big, big category. If you look at the team, also a difficult question. I mean you’ve seen that we have changed most of the Board. So that is a check. Then when it gets to the rest of the team, there are changes. You’ve seen a couple of them today. And of course, there will continue to be changes but most of those changes is actually elevating internal talent. I think what we have seen is that we have a lot of good people in the second, third and fourth string internally.
And the goal is clearly to recruit less outside. But then to give our, what should I say, talent that is hold back the chance to get into a higher position. And I’m very, very impressed actually from what I’ve seen in the 9 months, how much talent we have. And again, give us some time and then we will look at structure again during 2024. You have to remember that this year was about attitude and what should I say, take away a lot of hiddenness and breaking rules to get quicker and go to market quicker. We still have a lot of work to do when it gets to actually formalizing that into processes and structure. But attitude and results first and then you can make it more professional afterwards.
Operator: The next question comes from the line of Edouard Aubin with Morgan Stanley.
Edouard Aubin : So one question on China, one question on sales next year. So on China, Bjorn, sorry, just some clarification on the back of what you just mentioned earlier. The neo line, are you looking at completely you’re downsizing the business? Are you looking at completely kind of discontinue this line in China? And also related to what you have said in the past in terms of designing product in China for China, I think you gave the target of about 30% kind of if you could give us an update in terms of that objective and kind of come back on why the need to design product locally in China? And then just lastly, related to that, is the push kind of designed to compete more with the Chinese brand in lower-tier cities? Or would you rather compete more with making higher tier cities?
