Following today’s release of Adidas’ figures for the three months ending 31st March 2023; Pippa Stephens, senior apparel analyst at GlobalData, a leading data and analytics company, offers her view: “Adidas’ woes continued into Q1 FY2023, with reported revenue falling by 0.5% to €5.3bn, and operating profit plunging by 86.2% to just €60m, significantly underperforming its key rivals Nike and Puma, which saw revenue grow by 14.0% and 14.4% respectively across comparative periods. While Adidas’ troubles are largely down to the termination of Yeezy, with sales excluding this brand up 9%, it also has less desirable designs than its competitors which has driven away many of its formerly loyal shoppers. Its performance was hindered by North America, where revenue fell 19.6% in neutral currencies due to Yeezy’s popularity there, with revenue excluding the brand down only 5%. Greater China revenue declined 9.4% as local brands like Li-Ning and ANTA continue to steal share. EMEA grew 4.0%, though this would have been boosted by tough Omicron comparatives and driven by high inflation, while Asia Pacific and Latin America outperformed considerably, rising by 15.6% and 48.7% respectively. Adidas’ short-term revenue outlook remains bleak, with FY2023 still expected to decline by high single-digits, including a €1.2bn loss if it does not sell its remaining Yeezy stock.
“Despite losing Yeezy, its footwear segment grew by 1% as it was held up by its Samba, Gazelle and Campus styles soaring in popularity, as well as its performance segment, with football products bolstered by the FIFA Men’s World Cup at the end of 2022. However, apparel sales fell 3%, signalling that its new Adidas Sportswear label which it launched in February has not yet had a significant impact, so it must focus on growing awareness of it more through impactful marketing. In terms of channels, e-commerce sales dropped 23%, significantly impacted by the Yeezy termination, whereas DTC stores rose by 11%, boosted by Omicron affecting footfall at the beginning of 2022.
“Adidas has found itself in hot water yet again, as it is being sued by investors who claim it knew about the risks of its partnership with Kanye West long before it cut ties. While it is unable to reverse its past mistakes, it must now quickly come to a decision on what to do with its remaining Yeezy stock, to avoid angering its investors even further. Should it decide to sell it, it risks damaging its brand reputation even further, so must ensure it does so sensitively to avoid upsetting customers. With its Ivy Park collaboration with Beyoncé also reportedly coming to an end, it must now rebuild its star power through new partnerships, as this will give it a better chance of regaining its losses and rebuilding its competitiveness in the sportswear market.”
