Adidas reports first annual loss in three decades as sales take a hit after the company stopped sales of the popular Yeezy sneaker line.
ADVERTISEMENTSports apparel giant Adidas has reported its first annual net loss in three decades, due to high levels of US inventories and lower demand impacting sales. The company saw a net loss from continuing operations of €58 million for the full year 2023.
The company also reported that North American sales dropped 21% in the last quarter of 2023 and 16% throughout the year. The company has taken a significant hit due to stopping sales of the much in demand Yeezy sneaker line, although it later resumed sales to clear remaining Yeezy stock.
CEO Bjorn Gulden said in a press statement by the company: "Although by far not good enough, 2023 ended better than what I had expected at the beginning of the year. Despite losing a lot of Yeezy revenue and a very conservative sell-in strategy, we managed to have flat revenues.
"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 product for 2024 is good, our new marketing campaigns for both Originals and Performance will continue to strengthen the brand. Our Sportswear business with clear takedown strategies will strengthen the distribution in the commercial channels in both wholesale and direct to consumer (DTC).
Adidas expects underlying business to grow in 2024
Looking at its outlook for the year ahead, the company said it expected the underlying Adidas business to advance at a high single figure rate, whereas currency-neutral revenues are forecast to rise at a mid-single figure rate. Operating profit is expected to be about €500 million, dependent on foreign currency fluctuations.
Chinese sales are also expected to rebound strongly, rising in double digit rates potentially.
The leftover Yeezy sneaker stock is expected to be sold at cost, with batches being released periodically, which may also help increase demand. Adidas severed its partnership with rapper Ye, formerly known as Kanye West, back in October 2022. This followed Ye's increasingly antisemitic and racist comments and outbursts.
After ending the commercial relationship with the rapper, the company was left with around €1.2 billion worth of Yeezy sneakers in its warehouses.
Adidas declared that it would be donating part of the proceeds, about $150 million (€137.1 million), from the Yeezy sneaker line sales to organisations taking a stand against racism and antisemitism.
These organisations include the Anti-Defamation League, as well as the Philonise & Keeta Floyd Institute for Social Change. The latter is run by George Floyd's brother, social justice advocate Philonise Floyd.
Adidas is dealing with shipping delays due to the ongoing Houthi Red Sea shipping attacks. These have forced several shipping companies such as Maersk, Hapag Lloyd and Mediterranean Shipping Company (MSC) to pause transits through the Red Sea and Suez Canal. Other commercial vessels have also had to travel further - around the Cape of Good Hope in South Africa - adding significant time and costs to their journeys.
