Renowned German sportswear giant, Adidas encountered a significant setback as it posted its first annual loss in over three decades. This downturn is largely attributed to challenges in the North American market, where sales are anticipated to decline once more due to high inventories plaguing sportswear retailers.
The company has been grappling with the aftermath of severing ties with Kanye West in October 2022, a move that led to the suspension of sales for the highly lucrative Yeezy sneaker line. However, under Bjorn Gulden's CEO leadership, Adidas initiated the clearance of remaining Yeezy stock while focusing on revitalising popular products such as the Samba and Gazelle shoes, along with efforts to strengthen partnerships with retailers. This strategy led to a recovery in Adidas' shares, outperforming competitors like Nike and Puma since Gulden assumed his role.
Expressing cautious optimism, Gulden acknowledges, though Adidas’ performance fell short of expectations in 2023, the brand showed improvement over the course of the year. Yet, its sales in North America are projected to decline by approximately 5 per cent this year, reflecting ongoing challenges with demand and inventory management in the region.
In 2023, Adidas managed to reduce its inventories by €1.5 billion, marking a 24 per cent decrease primarily through clearance sales at outlet stores. However, the company faces additional hurdles such as shipment delays caused by the Red Sea crisis, which could potentially impact working capital if disruptions persist.
Despite the broader decline in consumer interest in sportswear, Adidas remains optimistic about reclaiming market share from competitors. Excluding the Yeezy line, the company anticipates an improvement in its underlying business in 2024, targeting a growth rate of at least 10 per cent in the latter half of the year.
A shift towards low-rise suede sneakers like the Samba and Gazelle has contributed to Adidas' resilience, with footwear sales growing by 8 per cent in the fourth quarter despite a 13 per cent decline in apparel sales. Notably, the company has observed a reduction in the need for discounted sales, indicating a strengthening brand appeal under Gulden's leadership.
In China, Adidas expects sales to to grow at a double-digit rate following an 8 per cent increase in 2023. However, the fate of the remaining Yeezy products remains uncertain, as the company adopts a cautious approach by selling them.
