Adidas Reports First Loss In 30 Years Amid Kanye West Fallout

Despite anticipating a 5 per cent decline in sales for the year, Adidas foresees continued weakness in North America

However, Adidas remains optimistic about its underlying business, excluding Yeezy, expecting improvement in 2024

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German sportswear mammoth Adidas reported its first annual loss in over three decades. Additionally, it cautioned that sales in North America were expected to decline further due to challenges faced by sportswear retailers in the US, who are grappling with excessive inventories, according to a news agency Reuters report.  Adidas has also been striving to recover from the fallout of terminating its partnership with Kanye West in October 2022. This move led to the suspension of sales for the lucrative Yeezy sneaker line.

In his first year as CEO, Bjorn Gulden prioritised resuming the sales of Yeezy sneakers to deplete existing stock while simultaneously focusing on enhancing the popularity of key products like Samba and Gazelle shoes and strengthening ties with retailers. As a result, Adidas shares have experienced a notable recovery, surpassing the performance of competitors such as Nike and Puma since his assumption of the role, as per the report.

"Although by far not good enough, 2023 ended better than what I had expected at the beginning of the year," Gulden said.

Despite anticipating a 5 per cent decline in sales for the year, Adidas foresees continued weakness in North America. The region has been impacted by reduced demand and excess inventory, prompting sportswear and apparel companies to offer discounts to alleviate stockpiles. Adidas reported a 21 per cent decrease in North American sales in the fourth quarter and a 16 per cent decline over the year. 

However, Adidas remains optimistic about its underlying business, excluding Yeezy, expecting improvement in 2024. The company anticipates double-digit growth in the second half of the year. The sports giant is banking on its ability to regain market share from competitors despite a general decline in consumer interest in sportswear. In response to weakening demand, Nike announced plans to reduce costs by cutting 2 per cent of its workforce, equating to over 1,600 jobs.

Adidas has seen success with the resurgence of low-rise suede "terrace" sneakers such as the Samba and Gazelle, leading to increased production last year. This trend contributed to an 8 per cent growth in footwear sales in the fourth quarter, although apparel sales experienced a 13 per cent decline.