Adidas reports first loss in 30 years: No more Yeezys that generated millions

The German sportswear giant Adidas announced on Wednesday its first annual loss in over 30 years and warned that sales in North America would fall again as sportswear retailers in the U.S. struggle with large inventories they apparently cannot clear, Reuters reported.

It is worth noting that Adidas has been in a difficult situation ever since the company severed ties with Kanye West in October 2022, halting the sale of the highly profitable and popular Yeezy sneakers.

Adidas CEO Bjorn Gulden continued to sell Yeezy sneakers to clear remaining stock while simultaneously trying to boost sales of popular products such as Samba and Gazelle models and improve relationships with retailers. It is important to note that Adidas shares have indeed recovered since the beginning of his tenure, outperforming Nike and Puma since he took the helm.

– Although not nearly good enough, 2023 ended better than I expected at the beginning of the year – said Gulden, adding that North America will continue to perform poorly, and he expects a sales decline of about five percent this year.

Lower demand and overloaded stores in the U.S. have hurt sportswear companies, and Adidas reported that sales in North America fell by 21 percent in the fourth quarter and by 16 percent over the year.

Overall, Gulden stated that clearing stock through their outlet stores helped Adidas reduce inventory by 1.5 billion euros in 2023, a decrease of 24 percent.

Adidas has indicated delivery delays of two to three weeks due to the crisis in the Red Sea, and Chief Financial Officer Harm Ohlmeyer said on Wednesday that there could be an impact on working capital if disruptions continue. The company continues to gamble that it can regain market share from rivals even as overall consumer appetite for sportswear declines, leading to job cuts at Nike.

China better than the U.S.

The company also stated that it expects its core business (excluding Yeezy sneakers) to improve this year, with growth of at least ten percent in the second half. Adidas has so far benefited from the trend of low suede sneakers such as Samba and Gazelle, and last year it increased production. This trend helped boost footwear sales by eight percent in the fourth quarter, while apparel sales fell by 13 percent.

– Things at Adidas are clearly moving in the right direction since Bjorn Gulden took over. The brand is growing, which is also evident from the fact that fewer and fewer products need to be sold at a discount – said Thomas Joekel, a portfolio manager at Union Investment, to Reuters.

In China, Adidas expects a stronger recovery, with double-digit sales growth following an eight percent increase in 2023.

It is worth noting that the company set low expectations for its remaining Yeezy products last month, stating that it would sell sneakers at a lower price. The last sale was launched on February 26, but predicting demand for the sneakers is difficult.

Yeezy sales are ‘still a bit insufficient,’ said Cristina Fernandez, an analyst at Telsey Advisory Group, despite the company successfully managing sales so far.

Adidas earned 750 million euros from Yeezy sales last year, resulting in a profit of 300 million euros. The company allocated 140 million euros for donations to charities fighting against anti-Semitism and racism.

The Adidas board will propose an unchanged dividend of 0.70 euros per share based on the results in 2023 despite a net loss of 58 million euros, the first since 1992.