Adidas expects a year of decline ahead
08/03/2023
The company based its outlook on performance over the 12-month period ended December 31, 2022, during which net sales amounted to $23.7 billion (€22.5 billion), a 6% rise over the year previous.
It attributed this growth, the equivalent of 1% in currency-neutral terms, to year-on-year sales increases in all markets except Greater China, which declined 36% thanks to “significant inventory takebacks” and challenges both specific to adidas and within the market itself, the group said.
Elsewhere, Latin American sales were up 44% year on year, followed by North America (up 12%) and Europe, the Middle East and Africa (EMEA), which experienced growth of 9% in the wake of the company's decision to wind down its Russian business. Asia-Pacific grew 4% year on year.
The termination of adidas’ Yeezy partnership notably had “a particularly strong impact” on North American sales during the fourth quarter, leading to a currency-neutral sales increase of 6% in that market. If forced to write off existing Yeezy inventory, operating profit could be negatively impacted to the tune of $530 million (€500 million), adidas said, not including other one-off costs, already projected to be in the region of $210 million (€200 million).
Mr Gulden described the current year as one of transition, in preparation for profitable growth in 2024 and 2025. “We need to reduce inventories and lower discounts,” he said. “Adidas has all the ingredients to be successful, but we need to put our focus back on our core: product, consumers, retail partners and athletes.”
This will require a refocused business model, the chief executive explained, involving a better balance of wholesale and direct-to-consumer sales and “more discipline in how we go to market”. Mr Gulden cited customer-led improved appetite for its Samba and Gazelle trainer styles, the “on fire” Latin American market and what he called “real opportunity to grow” in Japan and South Korea as cause for optimism moving forward, however.
“We will bring [adidas] back to being the best sports brand in the world once again,” he concluded.
Adidas chief executive, Bjørn Gulden. Credit: adidas.
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