Adidas Posts First Loss in 30 Years, But Hope Shines Through
In a turn of events as unexpected as finding a polite conversation on Twitter, Adidas, the behemoth of sportswear, has posted its first annual loss in more than three decades. This shocker was dropped last Wednesday, with a gloomy forecast for the sneaker aficionados in North America. Imagine a store so packed with unsold gear it could double as a warehouse for Amazon.
The saga began when Adidas decided to cut ties with Kanye West in October 2022, halting sales of the highly lucrative Yeezy sneaker line. It was a split messier than a celebrity divorce. In comes Bjorn Gulden, the new CEO, akin to a sheriff in a Wild West movie, aiming to tidy up the town. His strategy? Reintroduce Yeezys to clear out inventory while pumping up the volume on other hits like Samba and Gazelle sneakers. Under his guidance, Adidas shares began to climb, outperforming rivals Nike and Puma.
From Rocky Roads to Retail Revival
The plot thickens in the U.S., where Adidas’ sales took a nosedive, dropping 21% in the last quarter of the year. Overall, a 16% fall throughout 2023 isn’t just a stumble; it’s a full-on faceplant. But like a plot twist in a season finale, Bjorn turned to outlet stores, these unsung heroes of retail, slashing Adidas’ surplus by a staggering 24%. It’s the business equivalent of cleaning your room by shoving everything under the bed.
But then, the Red Sea crisis tossed a wrench into the works, creating shipping delays that could mess up their cash flow. It’s a bit like ordering a fast food burger and getting it after you’ve already left the drive-thru—frustrating and potentially disastrous.
Adidas, taking a leaf out of Nike’s book, started slashing jobs. It’s the corporate world’s version of “trimming the fat,” aiming to streamline operations as the global appetite for sportswear shows signs of dieting.
Gearing Up for a Better Tomorrow
Looking forward, Adidas isn’t just sitting on its laurels—or any other shrubbery, for that matter. They’re gearing up for what might be a comeback story worthy of a sports movie montage. The core business, minus the Yeezy line, is expected to see a growth spurt of at least 10% in the latter half of 2024. They’re doubling down on trendy low-rise suede “terrace” sneakers, which are climbing the popularity charts faster than a cat meme.
This strategic shift helped their footwear sector leap by 8% in the fourth quarter, while apparel sales dipped by 13%. It seems clothes just aren’t as cool as kicks right now.
Eyes are also on China, a market where Adidas is betting big with hopes of a double-digit growth spurt after a modest 8% increase last year. As for the Yeezy stock? They’re pricing them to just break even—proving that sometimes, you have to cut your losses to move forward.
Commitment to Values Amid Challenges
In a world where brands are often slammed for empty gestures, Adidas is putting its money where its mouth is. They made a neat 750 million euros from Yeezy sales last year, pocketing a cool 300 million euros in profit. But here’s the kicker: they’re donating 140 million euros to charities fighting antisemitism and racism. It’s not just about the bottom line—it’s about making a statement.
Despite the fiscal bruising, Adidas is sticking to its dividends, holding them steady at 0.70 euros per share. It’s a bold move, like declaring “I’m still standing” after a rough night out.
As Adidas stands at this critical juncture, Bjorn’s blueprint for the future reads like a mix between a battle plan and a pep talk. From the chaos of clearance sales to strategic moves into promising markets, Adidas’ narrative is shaping up to be less about a mere bounce back and more about a high-flying leap into the future.
So, lace up those sneakers—the race is on, and Adidas is not just running; they’re looking to set a new pace. Let’s see how fast and far they can go.
