Key Points:
- German sportswear giant Adidas reports its first annual loss in over 30 years, signaling challenges in the North American market.
- The company warns of a potential further decline in sales in North America as U.S. sportswear retailers contend with high inventories.
- Adidas is in recovery mode after cutting ties with Kanye West and suspending sales of the Yeezy sneaker line in October 2022.
- Sales in North America fell by 21% in Q4 2023 and 16% over the entire year. Adidas reduced inventories by 24%, amounting to a 1.5 billion euro decrease in 2023.
German sportswear giant Adidas reported its first annual loss on Wednesday in more than 30 years, citing challenges in the North American market. The company also warned about a potential further decline in sales in North America as sportswear retailers in the U.S. grapple with high inventories.
Adidas has been recovering since severing ties with Kanye West in October 2022, which led to the suspension of sales for the highly profitable Yeezy sneaker line. In his first year in the role, CEO Bjorn Gulden strategically resumed sales of Yeezy sneakers to clear remaining stock. Simultaneously, the company aimed to boost popular products such as Samba and Gazelle shoes and foster improved relationships with retailers.
Adidas shares have shown signs of recovery, outperforming competitors like Nike and Puma since Gulden assumed leadership. While acknowledging that the 2023 performance was “by far not good enough,” Gulden expressed that the year ended better than initially anticipated.
In the upcoming year, Adidas foresees a continuation of weakness in North America, projecting sales to decline by approximately 5%. The North American market has proven challenging for sportswear and apparel companies due to lower demand and overstocked stores. In the fourth quarter of the previous year, sales in North America for Adidas plummeted by 21%, contributing to a 16% decline over the entire year.
CEO Gulden revealed that the company reduced inventories by 24%, amounting to a 1.5 billion euros decrease in 2023. This reduction was achieved through strategic clearance efforts, including sales through outlet stores.
Adidas is experiencing two to three weeks of shipment delays due to the crisis in the Red Sea. Chief Financial Officer Harm Ohlmeyer noted on Wednesday that if these disruptions persist, they could impact working capital.
