Adidas has posted its first loss in 30 years and warns sales in North America would fall again
Adidas has posted its first loss in 30 years and warns sales in North America would fall again.
Adidas has been working to recover since ending its partnership with Kanye West in October 2022, which led to the suspension of sales for the profitable Yeezy sneaker line.
In CEO Bjorn Gulden's first year, he resumed sales of Yeezy sneakers to clear remaining stock while focusing on popular products like Samba and Gazelle shoes, and improving relationships with retailers. Since Gulden took over, Adidas shares have rebounded, outperforming Nike and Puma.
"Although still not satisfactory, 2023 ended better than my initial expectations for the year," Gulden said.
Adidas shares were trading flat as of 1115 GMT.
Adidas anticipates continued weakness in North America, expecting sales to decline by around 5% this year. Lower demand and overstocked stores in the U.S. have weighed on sportswear and apparel companies, with Adidas reporting a 21% sales decrease in North America in the fourth quarter and a 16% drop for the year.
Overall, Gulden noted that clearing stock through outlet stores helped Adidas reduce inventories by 1.5 billion euros in 2023, a 24% decline.
Adidas has experienced shipment delays of two to three weeks due to the Red Sea crisis. Chief Financial Officer Harm Ohlmeyer stated that there could be an impact on working capital if the disruptions continue.
Excluding Yeezy, Adidas expects its underlying business to improve in 2024, with growth of at least 10% in the second half. The company has benefited from the trend for low-rise suede "terrace" sneakers like the Samba and Gazelle, and has increased production accordingly. Footwear sales grew by 8% in the fourth quarter, while apparel sales fell 13%.
"Things have clearly been moving in the right direction at Adidas since Bjorn Gulden took over," said Thomas Joekel, portfolio manager at Union Investment. "Brand heat is increasing, which can also be seen from the fact that fewer products now have to be sold at a discount."
In China, Adidas expects a stronger recovery, with sales projected to grow at a double-digit rate following an 8% increase in 2023.
Adidas recently announced that it would sell its remaining Yeezy products "at least at cost." Despite successfully managing sales so far, demand for the shoes is difficult to predict.
Adidas generated 750 million euros in revenue from Yeezy sales last year, resulting in a 300 million euro profit. The company allocated 140 million euros for donations to charities combating antisemitism and racism.
Despite a net loss of 58 million euros, its first since 1992, Adidas' board will propose an unchanged dividend of 0.70 euros ($0.7650) per share based on its 2023 performance.