Adidas AG reported a rebound in sales with its retail partners and a return to growth in North America, when Yeezy sneaker sales were excluded, as the brand looks to increase profits after years of crisis.
The German sportswear company posted currency-neutral revenue growth of 17 percent in its wholesale business last quarter, according to a statement Wednesday, a sign that retail partners like Foot Locker Inc. and JD Sports Fashion Plc are again embracing Adidas products.
Now in his second year at the helm, chief executive officer Bjorn Gulden has been winning over investors with a back-to-basics focus on sports and developing new footwear and apparel. While he’s capitalized on demand for classic shoes like the Samba and Gazelle, he’s now looking to impress with the launch of products that were developed since his arrival in January 2023.
Gulden’s strategy involves focusing much more on retail partners, which have recently been pushing newer labels such as On Holding AG and Deckers Outdoor Corp.’s Hoka as Adidas and Nike built out their own e-commerce channels.
That approach appears to be bearing fruit, potentially allowing Adidas to close the gap with Nike, which is struggling to replace top sellers such as the Air Force 1 and Dunk sneakers.
Adidas shares were little changed in early trading, and are up almost 30 percent this year. Industry leader Nike Inc., by contrast, is down more than 30 percent in 2024.
In the second quarter, Adidas posted double-digit sales growth in Europe and Latin America and 9% growth in Greater China. In North America, sales fell by 8 percent, with the decline “solely related to the significantly smaller Yeezy business,” the company said. Excluding Yeezy, Adidas grew in both its North America wholesale and direct-to-consumer channels.
What Bloomberg Intelligence Says:
Adidas’ FX-neutral full-year sales could rise by high-single digits as its turnaround appears underway after 2Q’s results, and 2024′s outlook is consistent with its July 16 pre-announcement, putting it in a position to recapture lost share.
— Poonam Goyal, BI retail-industry analyst
Adidas Momentum Continues to Build With Strong 2Q Results: React
Adidas also saw modest growth with its apparel offerings, driven by demand for football jerseys tied to this summer’s championships in both Europe and the Americas. Both Spain and Argentina, which won the tournaments, wear Adidas jerseys.
Yeezy footwear contributed about €50 million in operating profit during the second quarter, or about 14 percent of the total. At its height, Yeezy shoes were generating close to half of Adidas’ profit. Adidas cancelled the Yeezy partnership in October 2022 following the rapper Ye’s string of anti-Semitic comments.
Earlier this month, the company published figures showing better-than-expected second-quarter sales and raised its earnings forecast for the year. It now expects to generate operating profit of around €1 billion. That’s an increase from the previous target of €700 million but below analysts’ average estimate of €1.1 billion.
By Tim Loh
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