German sportswear giant Adidas has reported a net loss for the year 2023, marking the first time in over 30 years that the company has experienced a loss.
The company recorded a net loss of 75 million euros attributable to shareholders for the year and a loss of 379 million euros in the fourth quarter. These poor financial results have been attributed to lower demand for apparel and sportswear in the United States, as well as overstocked stores that have continued to eat into sales.
The total revenue for Adidas in 2023 declined by 5%, amounting to approximately 21.5 billion euros. The results released by the company indicate a significant decline in sales compared to the previous year. The noticeable drop in revenue has been attributed to various factors, including the company’s dispute with rapper Kanye West, who launched his shoe brand Yeezy with Adidas in 2015. However, Yeezy was dropped by Adidas in October 2022, after a series of controversial comments made by West.
Adidas’ sales in North America suffered heavily in the year due to the discontinuation of its partnership with West. It is estimated that the company lost around 500 million euros compared to the previous year due to the discontinuation. However, sales were resumed later in the year, with the aim of reducing inventory. Despite these efforts, currency-neutral sales in North America dropped by 16% in the year.
In contrast, Adidas saw growth in other regions, with revenues in Greater China increasing by 8%, sales in Asia-Pacific rising by 7%, and Latin American sales up by 22% in the year. The company’s CEO, Bjørn Gulden, stated that while the financial results were not good enough, 2023 ended better than expected.
In 2022, the US led sneaker sales with $22B, selling 380M pairs. Nike topped global sales at $33B by May 31, 2023. Adidas earned $13B, highlighting Nike’s lead.
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According to Gulden, Adidas was able to achieve an operating profit of €268 million, despite losing a significant amount of revenue from Yeezy. He also attributed this accomplishment to a disciplined go-to-market and buying process, which helped reduce inventories by almost €1.5 billion. However, the company’s CEO acknowledged that the situation in the United States remains a challenge, as sales are expected to struggle into 2024.
Looking ahead to the coming year, Adidas expects to see significant revenue growth in all markets except for North America, where the company will continue to sell off excess inventory. This could be an indication that the effects of the discontinuation of the Yeezy line are still being felt, and the company is taking concrete steps to address it. Adidas plans to focus on discipline and tighter inventory control in the coming year to improve its financial performance.
Despite the challenging financial results, Adidas remains a global leader in sportswear, with a strong presence in various regions. The company has a loyal customer base and a wide range of popular products that have continued to drive sales. In addition, Adidas has taken steps to expand its product line and enter new markets, which could help boost revenue in the future.
It is worth noting that Adidas is not the only sportswear company to face financial challenges in recent years. Its rival, Nike, also experienced a decline in sales in North America in 2023, due to the impact of the pandemic and political tensions. Therefore, it is clear that the sportswear industry as a whole is facing challenges, and Adidas’ financial results may not be entirely reflective of its own efforts and performance.
