Adidas Reels in Its First Loss in Three Decades

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Nitin Konde, Apoorva Bajj

Mar 15, 2024 — 3 min read

Adidas Reels in Its First Loss in Three Decades

The name Adidas is instantly recognizable to the vast majority of people on the planet. This German brand has widespread support among athletes. This brand has grown into a trillion-dollar behemoth because of its strong web presence and worldwide store presence. Nevertheless, it recently ended its 30-year successful run with a massive loss and issued a warning that sales in North America would decline once more due to sportswear retailers' struggles with huge inventories. After severing relations with Kanye West in October 2022 and halting sales of the wildly successful Yeezy sneaker line, Adidas has been fighting to get back on its feet.

The move made in October 2022 had a devastating effect on the company's finances, particularly on sales of the wildly popular Yeezy shoe line. The fallout from this split shows how challenging it is to maintain prominent partnerships in the dynamic fashion industry.

Adidas posts first loss in 30 years

Bjorn Gulden Pushing Hard to Repair the Business Dent
North America Continued to Be a Bleak Market for the Brand
Way Forward

Bjorn Gulden Pushing Hard to Repair the Business Dent

In the middle of all the chaos, Bjorn Gulden, Adidas' CEO, stepped up to the plate and faced the enormous challenge of getting the company back on track. During his first year on the job, Gulden took calculated steps to deal with the aftermath of Kanye West's split.

To move existing inventory, Yeezy sneaker sales have resumed, and the brand is also making strides to revitalize its other popular shoe lines, such as the Gazelle and Samba. Adidas stock has been on the upswing since Gulden took over as CEO, surpassing rivals like Puma and Nike, demonstrating that his leadership is making an impact despite the challenges.

North America Continued to Be a Bleak Market for the Brand

Although the company is making a lot of efforts to get the business on track, however, the brand feels that North America’s market will continue to be a weak selling zone. The North American market continues to be a challenge for Adidas, despite Gulden's best efforts. Forecasts indicate that sales in the region will keep falling, with a 5% drop for this year alone.

Overstocked stores and falling customer demand are the two main causes of this problem, which has affected athletic and apparel businesses around the country. The gravity of the situation was highlighted by Adidas' shocking 21% decline in North American sales during the final quarter of 2023.

Adidas' strategy has included an emphasis on inventory management, which stands apart. In 2023, the corporation successfully decreased inventories by 1.5 billion euros, which is a 24% fall. Sales at outlet stores, which helped clear off surplus inventory, were mostly responsible for this cut. Nevertheless, the Red Sea crisis caused more problems for Adidas by delaying shipments, which created logistical issues and may have affected working capital.

Adidas is nevertheless hell-bent on reclaiming lost ground in the market and expanding its business, despite the losses. With the Yeezy line excluded, the company's underlying business is expected to rebound and increase by at least 10% in the second half of the year, according to projections. The Samba and Gazelle are two examples of popular low-rise suede 'terrace' trainers that have helped boost sales of footwear and sparked consumer optimism.

Way Forward

Adidas' current problems illustrate the complex dynamics of the sportswear industry, where brand collaborations, market movements, and disruptions in the supply chain can significantly affect financial results. Under Bjorn Gulden's leadership, however, the company has shown resilience and determination by overcoming these challenges. By continuing to innovate, recover from market downturns, and provide value to shareholders, Adidas is solidifying its position as a world leader in the sportswear industry.