Adidas has blamed an overstocked market for its warning that sales in North America will decline this year.
The German sportswear company continues to sell trainers from the axed Yeezy collection, despite having announced in October 2022 it would terminate its collaboration with Kanye West immediately after the rapper’s anti-Semitic comments.
Adidas’ first net loss since 1992 was €58m in 2023. The company also said that currency-neutral North American sales this year are likely to fall at a single-digit rate. However, growth is forecast for all other regions. The group had previously released preliminary results in late January, and delivered a forecast for 2024 that was far below analyst expectations due to the sale-off of the Adidas Yeezy line.
Adidas expects that the impact of the slowdown on the United States will be lessened by the recovery in China. After a 37 percent jump in the last quarter of 2023, Adidas has forecast a double-digit increase in sales in this year. Last year, sales in China rose 8 percent after a pandemic that slashed the country’s economy. Adidas had always relied on China to drive its profit growth before Covid. Western brands have also been boycotted for their stance on Cotton from the Xinjiang Region. Human rights groups claim that this cotton is produced using forced labour.
The company’s worst three-decade performance was also precipitated by its withdrawal from Russia following the conflict in Ukraine.
Bjorn Gulden (58), the new CEO, re-opened sales for the trainer line to clear the remaining stock, even if it was at a cost or below. He said that, “although by no means good enough, the 2023 year ended better than what I expected at the start of the year.” “We had expected a negative operating result but we achieved an operating profit €268 millions.”
The company initially projected an operating loss in 2023 of €700,000,000, but the actual operating profit reported was €1 billion more than expected. Net losses of €58m compared to a profit of €254m in 2022.
The company reported that its sales in North America fell by 21% in the last quarter, and by 16% for the entire year.
Adidas is not the only sportswear company that has been affected by a combination between a lower demand and an excessive amount of stock. Last month Nike announced that it would be cutting 1,600 jobs. This is equivalent to 2% of its workforce.
Last year, the German company generated revenues of €750million from Yeezy sales. This translated to a profit of €300million. The company set aside €140m for donations to charities that fight antisemitism, racism and other forms of prejudice. In 2020 Yeezy revenues had hit €1.2 billion.
Adidas shares quoted on the Frankfurt Stock Exchange closed up 3.8 percent or €7.41 at €200.15.