By BERLIN (Reuters) – Adidas AG will stop making its products and apparel in China and will focus on sales in Europe, its chief executive said on Tuesday, signaling a significant shift in the fashion industry’s strategy.
China has emerged as a global market for fashion and footwear after a surge in Chinese consumers who spend a growing portion of their incomes on luxury goods.
The country is also becoming a major destination for Western brands like Nike, Gucci and Louis Vuitton.
Adidas is one of the most well-known brands in the world but the Swiss company has struggled to gain a foothold in China after a year of intense scrutiny from government officials.
Adidas said in a statement it would sell its fashion and sports goods in Europe and in the United States in partnership with an international partner.
“We will make Adidas-branded apparel available in Europe only, and Adidas-designed footwear available only in the U.S. and Canada, where we are focused on our core business,” Adidas said in the statement.
Adidas said it planned to spend $100 million on research and development for the next four years to “better understand the market and create new business models.”
Adadidas is one the world’s biggest luxury brands with a huge market share of about 45 percent, according to Euromonitor International.
The company also makes sports shoes and clothing, a range of footwear and accessories.
The announcement comes days after the European Union’s top consumer watchdog warned Adidas of possible violations of consumer protection laws in Europe over its Chinese-produced shoes.
The EU has ordered Adidas to cease making Chinese shoes for five years.
In a separate statement on Tuesday the head of the German consumer watchdog said it was concerned about Adidas shoes that were imported from China.
The EU said the shoes were “often made in China by Adidas-owned factories in violation of consumer and environmental regulations.”
Adidas has said it is committed to European customers and is working to develop more sophisticated sourcing practices.
It said it would introduce more European-made products and will invest in more “sustainability and environmental management” measures.
The move comes amid an increasingly complex supply chain that includes the manufacture of the shoes, the assembly of the footwear and the packaging.