Yeezy fiasco helps push Adidas into loss as US sales continue to fall

Yeezy fiasco helps push Adidas into loss as US sales continue to fall - Business and Finance - News

Adidas Endures Rare Annual Loss Amidst Challenges from Yeezy Fallout, Higher Taxes, and Declining Sales in North America

The German sportswear giant, Adidas, reported a net loss of €58 million ($63 million) for its core business in the year 2023. This unfortunate financial outcome was attributed to various factors including lower sales of Yeezy-branded clothing and sneakers, a substantial increase in taxes, and decreasing sales in North America.

Chief Financial Officer, Harm Ohlmeyer, acknowledged the company’s challenging year to journalists when he stated, “We didn’t have a great year in 2023.” Shares of Adidas (ADDDF) experienced a near 4% decline in early trading but later recovered by 9.40 a.m. ET.

In October 2022, Adidas terminated its high-profile partnership with Yeezy designer Ye, formerly known as Kanye West, following his controversial anti-Semitic remarks. The company has been liquidating its remaining Yeezy stock and intends to donate a substantial portion of the proceeds to organizations working against discrimination and hate, including racism and anti-Semitism.

The 2023 tax burden was more significant than in the previous year, but Adidas anticipates relief from this burden as its operating profit recovers. In their official statement, they expressed, “Going forward, the company expects the tax rate to normalize again as its operating profit improves.”

Sales in North America – Adidas’ second-biggest market – declined by more than 16% in 2023. To address the high inventory levels among wholesalers, Adidas significantly reduced their sales to these retailers. The company anticipates a further decline in sales for this region by around 5% in the current year.

CEO Bjørn Gulden addressed journalists, stating, “All contact brands have a difficult time in the US compared to the American brands.” In response, Adidas aims to invest more resources into popular sports like baseball and basketball to enhance its reputation among American consumers.

Contrasting the negative trends in North America, sales in China – Adidas’ third-largest market – grew by over 8% last year, with sales almost tripling in the final three months of 2023 compared to the same period in 2022. The company predicts double-digit growth in China for the current year.

While sales of Adidas footwear, which include popular styles like Samba and Gazelle sneakers, increased by 4%, there was a 6% decline in sales for Adidas apparel. On an operating profit basis, the company recorded €268 million ($293 million) last year, which was a significant decrease of almost 60% compared to 2022.

Olesya Dmitracova contributed to this article.