January 1, Sportswear Giant Adidas Faces Unprecedented Loss

Adidas, the renowned German sportswear giant, disclosed a net loss for the year 2023 on Wednesday, marking its first loss in over three decades. The company also hinted at potential challenges to its revenues in North America in the coming year.

The total revenue for Adidas witnessed a 5% decline in 2023, amounting to approximately 21.5 billion euros. The company reported a 75 million euro loss attributable to shareholders for the year, and a 379 million euro loss in the fourth quarter. This disappointing financial performance, the company’s first loss in more than 30 years, is primarily due to decreased demand for apparel and sportswear in the U.S. and overstocked stores continuing to affect sales.

“Although by far not good enough, 2023 ended better than what I had expected at the beginning of the year,” stated Bjørn Gulden, CEO of Adidas, in the fourth quarter press release.

Despite losing a significant amount of Yeezy revenue and implementing a very conservative sell-in strategy, the company managed to maintain flat revenues. “We expected to have a substantial negative operating result, but achieved an operating profit of €268 million. With a very disciplined go-to-market and buying process, we reduced our inventories by almost €1.5 billion. With the exception of the US, we now have healthy inventories everywhere.”

The company’s North American sales suffered a significant blow due to its disagreement with rapper Kanye West. After Adidas severed ties with West’s shoe brand Yeezy in October 2022 following a series of controversial comments, the company lost around 500 million euros compared to the previous year. Sales were resumed later in the year to reduce inventory.

In 2022, the U.S. led sneaker sales with $22B, selling 380M pairs. Nike topped global sales at $33B by May 31, 2023, while Adidas earned $13B, further emphasizing Nike’s lead.

Sales in North America, adjusted for currency fluctuations, dropped 16% in the year. However, sales in Greater China rose 8%. Revenues in Asia-Pacific increased by 7%, and Latin American sales saw a significant boost, up 22% in the year.

Looking ahead to 2024, Adidas expects revenues to grow significantly in every market except North America. The company plans to continue selling off excess inventory as consumers grapple with financial constraints.

Adidas did not immediately respond to a request for comment.

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