Under 100 Words: A Compact Summary
Adidas faced its first annual loss in over 30 years, mainly due to North America’s sales decline and the termination of its partnership with Kanye West. Despite challenges, CEO Bjorn Gulden’s strategies, including reviving Yeezy sales and emphasizing popular products, have shown positive results, albeit cautious optimism prevails (Adidas Reports First Loss in 30 Years).
- On Wednesday, Adidas, the prominent German sportswear company, reported its initial annual loss in over three decades.
- Additionally, it cautioned that sales in North America are expected to decline once more, with sportswear retailers in the US grappling with excessive inventories.
- Adidas has been striving to recover since it terminated its partnership with Kanye West in October 2022, resulting in the suspension of sales for the immensely profitable Yeezy sneaker line.
- During CEO Bjorn Gulden’s inaugural year in the position, he reinstated the sales of Yeezy sneakers to deplete remaining inventory while focusing on enhancing the popularity of products such as Samba and Gazelle shoes.
- Additionally, efforts were made to enhance relationships with retailers. As a result, Adidas shares have experienced a rebound, surpassing the performance of both Nike and Puma since his tenure began (Adidas Reports First Loss in 30 Years).
- Gulden remarked, ‘Though still falling short of expectations, the conclusion of 2023 fared better than initially anticipated.’ Despite this, North America’s performance is anticipated to remain weak, with Adidas projecting a roughly 5% decline in sales for the current year. This is attributed to reduced demand and excessive inventory levels in the U.S., leading sportswear and apparel brands to implement discounts in efforts to clear stock.
- Adidas reported a 21% decrease in sales in North America for the fourth quarter and a 16% decline over the year. Consequently, Adidas shares experienced a 1% decrease by 0930 GMT (Adidas Reports First Loss in 30 Years).
- However, Adidas remains optimistic about its underlying business, excluding Yeezy, expecting improvement in 2024, particularly with double-digit growth anticipated in the latter half of the year.
- Adidas is taking a risk by aiming to regain market share from competitors despite a general decline in consumers’ interest in sportswear.
- Last month, Nike announced plans to trim 2% of its workforce, equivalent to over 1,600 jobs, in response to weakening demand, aiming to cut costs (Adidas Reports First Loss in 30 Years).
- Adidas has capitalized on the popularity of low-rise suede “terrace” sneakers like the Samba and Gazelle, significantly increasing production last year. This trend contributed to an 8% growth in footwear sales in the fourth quarter, although apparel sales declined by 13%.
- Thomas Joekel, a portfolio manager at Union Investment, commented, “Adidas has been moving in the right direction since Bjorn Gulden assumed leadership. The brand’s appeal is growing, evident from the reduced need for discounts on its products.”
- In China, Adidas anticipates a robust recovery, with sales expected to grow at a double-digit rate following an 8% increase in 2023 (Adidas Reports First Loss in 30 Years).
- Despite experiencing a net loss of 58 million euros, its first since 1992, Adidas announced that its board would propose an unchanged dividend of 0.70 euros ($0.7650) per share based on its 2023 performance.
- To manage expectations, Adidas recently announced that it would sell its remaining Yeezy products “at least at cost.” The latest drop was launched on Feb. 26, but predicting demand for these sneakers remains challenging (Adidas Reports First Loss in 30 Years).
- Cristina Fernandez, an analyst at Telsey Advisory Group, described Yeezy sales as “still a little bit of a wild card,” although the company has thus far successfully managed the sales.
- Despite the uncertainties, Adidas generated 750 million euros in revenue from Yeezy sales last year, resulting in a profit of 300 million euros (Adidas Reports First Loss in 30 Years). Additionally, the company allocated 140 million euros for donations to charities combating antisemitism and racism.
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