Adidas, the German sportswear giant, recently announced its financial results for 2023, marking a historic moment for the company: for the first time in over three decades, it ended the year with a loss.
An historic result
In 2023, Adidas recorded a loss of EUR 58 million, an event that had not occurred since 1992. This result surprised analysts and investors, considering the financial strength the company has demonstrated over the years. Sales, which stopped at EUR 21.4 billion compared to EUR 22.5 billion in 2022, fell by 5% year-on-year, marking a clear deviation from the previous growth trajectory.
The causes of an unexpected loss
Fall in demand
The decline in demand for sportswear, especially in the US, played a crucial role in the financial results for 2023. This phenomenon reflected the broader challenges faced by the sportswear industry in adapting to changing consumer preferences and the global economic environment.
End of collaboration with Kanye West
Another determining factor was the end of the collaboration with Kanye West, which had a major impact on the company’s finances. After the rapper’s controversial statements, Adidas stopped production of Yeezy shoes, which previously accounted for around 7% of annual sales. This decision not only deprived Adidas of a significant source of revenue but also caused an increase in storage costs for unsold products.
The adidas response
The new CEO’s strategies
Bjørn Gulden, who took office as CEO in 2023, has taken several measures to turn the company’s fortunes around. These include the decision to resume sales of existing Yeezy products to reduce inventory costs and actively promote sales of other shoe models, such as the Samba and Gazelle, which have been positively received by the market.
Results in Different Markets
While in the US Adidas recorded a 16% drop in sales, in China the company saw an 8% increase. This dichotomy highlights the challenges and opportunities Adidas faces in different global markets.
In Europe and the US, there is a noticeable decrease in consumer hunger for sporting goods. In fact, all brands operating in the sector are having some difficulties, including even NIke, which announced in February a 2% job cut.
Conclusion
2023 was a difficult year for Adidas, which faced significant losses for the first time in three decades. The end of the partnership with Kanye West and falling demand in the US weighed on the financial results. However, the strategies adopted by new CEO Bjørn Gulden suggest a path to recovery, demonstrating Adidas’ resilience and adaptability in the face of adversity.
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