The separation of US scandal rapper Kanye West and the joint brand “Yeezy” costs the sporting goods company a lot of sales and profits.
(Photo: Reuters)
Munich The troubled Adidas group is not gaining momentum even under new leadership. In the first quarter, sales stagnated at 5.3 billion euros, as Adidas reported on Friday. As a result, the world number two once again underperformed its most important competitors. The bottom line was a small loss.
However, the new CEO Björn Gulden sees progress. If you exclude the sales of the “Yeezy” brand from the stopped cooperation with the US scandal rapper Kanye West, the revenues have increased by nine percent. The quarter was therefore “better than expected”, said the Norwegian. “Adidas has everything it takes to be the best sporting goods brand in the world, to grow strongly and to be a good, profitable company.”
At the turn of the year, Gulden took over the management of the world’s second largest sporting goods group. Previously, he had led the competitor Puma, which had been more successful in recent years. Predecessor Kasper Rorsted had to leave early last fall due to the crisis.
Puma and Nike recently grew in double-digit percentage terms
Gulden has already started with the conversion: He personally took over the brand management and intensified the contacts to the specialist dealers. However, it is clear to everyone involved that quick successes cannot be expected.
The competition has also developed better in recent months. Gulden’s former company Puma increased sales in the first quarter by 14 percent to 2.2 billion euros. World market leader Nike grew in its third quarter of the 2022/23 financial year – that is the period from December to February – by 19 percent to 12.4 billion dollars.
Adidas’ profitability also remains weak. The operating result collapsed from 437 to 60 million euros. The bottom line was a loss of 30 million euros after a profit of 490 million euros in the same period last year.
In China, the decline in sales is slowing down
The crisis at Adidas, as a result of which CEO Kasper Rorsted had to leave, has a number of causes. In China, the group suffered from a boycott of Western brands and offered too few products specially adapted to the Chinese market. In the past quarter, China revenues fell again by nine percent. Puma was able to grow again in China for the first time.
With the “Yeezy” brand, Adidas, in cooperation with Kanye West, had achieved sales of well over one billion euros in good times. These proceeds are now missing. Investors also complained about an innovation deficit at Adidas.
There are also problems in North America. “The most difficult challenge is the business situation in the USA,” says an Adidas manager. The discount pressure is great here, and Puma also had to record a significant drop in sales in the first quarter. Add to this the missing “Yeezy” sales at Adidas. The brand was particularly popular in the USA. Overall, adidas sales in China fell by 20 percent in the first quarter.
Gulden is correspondingly cautious for the year as a whole. For 2023, he continues to expect a drop in sales in the high single-digit percentage range, also due to the high inventories, and a loss of up to 700 million euros in operating profit is possible. “2023 will be a bumpy year with disappointing numbers where our goal is not to maximize our short-term financial results,” said Gulden.
Investors have already prepared themselves for a transitional year. “We are confident that Björn Gulden can turn things around,” agrees Thomas Jökel, portfolio manager at Union Investment. “But we still have to give him time for that.”
More: Puma has double-digit percentage growth after change of boss.