More Fashion, More Localization, Less Pressure: How Adidas Plans Double-digit Growth by 2026
This story has been updated.
BERLIN — Reporting 2023 financial results on Wednesday, executives at German sportswear giant Adidas explained their new direction for the company’s global marketing efforts. A new motto — “you got this” — will replace Adidas’ previous catchphrase, “impossible is nothing.”
More from WWD
“There is a lot of pressure out there and this ‘you have to just do it’ or ‘do something impossible’ is also a kind of a pressure,” Adidas chief executive officer Bj?rn Gulden said. “The attitude of the company should be youthful and optimistic. So we think it’s a very positive message because, you know, you all have your pressure and your difficulties,” he told journalists at Adidas headquarters in Herzogenrath, Germany. “But ‘you got this’ — if you want it.”
Gulden could just as easily be talking about the company he runs. In 2023, the second-largest sportswear company in the world after Nike experienced its first loss in around 30 years. Adidas is still working to recover from the loss of its very profitable Yeezy line. A long-running collaboration with the musician Kanye West, also known as Ye, ended in late 2022 after West made a number of racist and antisemitic statements.
Adidas had previously predicted that it might not break even during 2023 but said Wednesday it performed better than it expected last year, even as results disappointed market analysts. The last quarter of the year ended with Adidas’ sales falling 7.6 percent to 4.81 billion euros. For all of 2023, revenues dropped 4.8 percent to 21.43 billion euros.
If it were not for the Yeezy business, Adidas would have seen currency-neutral revenues grow 2 percent in 2023, the company said.
The results for both the fourth quarter and the full year, which Adidas had already revealed in a preliminary statement in January, were below market consensus.
“These are not good results,” Adidas’ chief financial officer Harm Ohlmeyer conceded. “But the story in 2023 is about great progress.”
In 2023, Adidas’ operating profit also decreased significantly, falling 59.9 percent to 268 million euros from 669 million euros. But, as Gulden pointed out, Adidas had originally forecast an operating loss of around 700 million euros in 2023. The year’s result meant Adidas had actually improved that outlook by around a billion euros, he said.
Some of this was certainly due to selling off remaining Yeezy product, which added 750 million euros to the company’s sales in 2023. The last Yeezy goods will be sold in 2024 and should bring in about 250 million euros, Adidas noted. The company has already set aside around 140 million euros for donations to charitable causes, to be dispensed through its newly launched foundation, but this year’s Yeezy sales will be at cost so won’t add any more to the donation pool, Gulden said.
The CEO also put to rest rumors that Adidas might work with Ye again — these came after the publication of a picture of what Gulden says was a coincidental meeting with Ye at an airport recently, as Gulden was returning from watching the Super Bowl.
Gulden then outlined plans to return Adidas to growth without the profitable line.
The German sportswear giant remains positive about what it can achieve in 2024, as the company celebrates its 75th anniversary, and predicts currency-neutral revenues will increase at a midsingle-digit rate. The first quarter of 2024 was already looking better, Gulden said, and things should improve further in the second half of the year.
Market analysts from the likes of UPS and J.P. Morgan were cautiously optimistic, greeting the news of improvements in the first quarter of this year positively.
By 2026, the plan was for Adidas to achieve double-digit growth and Gulden then spoke about how he might make that happen; the former Puma boss started working at Adidas at the beginning of 2023.
“Local relevance has become even more important than global relevance,” Gulden stressed. “The time where you had a global selection and tried to sell it everywhere is over. I think the mindset of production, creation, sourcing and even marketing needs to be as close as it can to the consumer. One avenue for that is to work more closely with our retail partners.”
Localization is why Adidas is sourcing more product inside China and India and has established a design office in Los Angeles, he explained, as well as working more closely with American retailers.
“The difference between Europe and America is bigger than people think,” Gulden cautioned. “It’s much more economical to work with American retailers on what they want, rather than telling them what [you think] they want.” That’s why design for American street culture and American sports like basketball and football should come from Los Angeles rather than Herzogenrath, he argued.
In 2023, the North American market continued to be a concern for Adidas. Over the year, sales there fell 16.1 percent, in currency neutral terms, to 5.22 billion euros and the market was particularly affected by the negative Yeezy impact, the company explained. North America is lagging around six to nine months behind other territories, executives said, adding that they hope to see improvement there soon.
Latin America is a much smaller market but there Adidas saw growth of 21.6 percent, in currency neutral terms, and sales totaling 2.29 billion euros.
In Adidas’ largest territory, its home market of Europe, the Middle East and Africa, sales dipped 0.4 percent, in currency neutral terms, in 2023. Adidas had sales of 8.23 billion euros in its home territory last year. Business in Greater China and Asia Pacific looked better. In the fourth quarter of 2023 the company saw significant growth in Greater China of 36.8 percent, currency neutral. Some of this was likely due to the ongoing Chinese recovery after COVID-19 lockdowns during 2022.
Over the year, in currency neutral terms, Adidas saw growth of 8.2 percent in Greater China and 7 percent in Asia Pacific. In Greater China, sales hit 3.19 billion euros and in Asia-Pacific they totaled 2.25 billion euros. Gulden thinks 2023 might have been a “turning point” for Adidas’ China business, with stores more productive and marketing possible again after an earlier boycott of Western brands.
In terms of Adidas product categories, footwear sales improved 4 percent last year, while apparel sales slipped 6 percent and were badly affected by high inventory levels, the company said in its statement.
“We started the year with a lot of bad inventory so we spent a lot of time clearing inventory,” Gulden explained. In the end, the company managed to reduce inventory levels by around 1.5 billion euros, Ohlmeyer added. This means Adidas is starting 2024 with “an almost clean inventory,” the executives said, the exception being the U.S. market.
Over 2023, the company saw successful sales of what are known as terrace shoes, like the top selling Gazelle, Handball Spezial and Samba. Next up would be the SL72, a terrace look-alike running shoe from the 1972 Olympics as well as the return of one of Adidas’ best known shoes, the Superstar. “In 2025, you’ll start to see collabs and lots of activations around it [the Superstar],” Gulden promised.
Also coming up will be new lifestyle running shoes. “You will start to see some quite creative — and I would even say, risky — directions in lifestyle running,” Gulden said. “Not all of them will be successful but they will drive the brand from a creativity point of view.”
Low-profile sneakers — that is, shoes with a very flat sole — were also a trend already seen on runways and on celebrities and Adidas had a number of suitable styles it was going to use to exploit this trend, too, including from motor racing and martial arts.
Although lifestyle and performance products are usually fairly distinct, in the future Adidas plans to incorporate more fashion into its performance sector.
“There are two elements to that,” Gulden told WWD. “If you go to the NBA and watch players coming in and out of a game, it looks like a fashion show. That has not been the same in soccer. So you will see that what the clubs and the federations get from [Adidas] will get more fashionable.”
For example, the Real Madrid soccer team was currently traveling in a special Y3 collection, the collaboration between Adidas and Yohji Yamamoto. “Not in Adidas tracksuits,” Gulden said.
The other reason for introducing more fashionable looks into performance apparel is simply because the two are merging anyway, the Adidas boss continued. “Fashion designers and creatives are already having a bigger impact on the performance range than they had before.”
Gulden predicted consumers would soon be seeing more fashionable looks in sports like tennis, track and field and golf, the likes of which hadn’t been seen there before, and that some sports teams might even end up playing in special versions of Adidas’ integral lifestyle collection, Originals.
The famous Adidas three-stripes logo will also start to appear in a more streamlined form, with the three stripes and the pronged trefoil on their own without the Adidas name underneath. “The visual language is very clear, very simple,” Gulden enthused. “For me, it looks like a new, modern Adidas.”
“As you can see we’re spending quite some resources to be visible with the new message,” Gulden concluded. “We have put all our energy into putting the brand in front of the retailer and the consumer. That does mean we are over-investing in marketing and product development. But I believe you need to have momentum on the top line before you start to optimize your cost levels. Those of you who know me, know that I love to get growth and then improve the business, by leveraging that momentum,” he declared.
Best of WWD
Solve the daily Crossword
