Adidas reports first loss in three decades but maintains dividend

Adidas, the German sportswear titan, reported its first annual loss in over 30 years on Wednesday, marking a challenging phase under the leadership of CEO Bjorn Gulden.

Publication: 13.03.2024 - 12:12
Adidas reports first loss in three decades but maintains dividend
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The loss follows a tumultuous split with rapper Kanye West in 2022, disrupting the profitable Yeezy sneaker line's sales. Despite the setback, Gulden, in his inaugural year, took strides to rejuvenate the brand by reintroducing Yeezy sneakers to deplete stock, focusing on boosting sales of classic lines like the Samba and Gazelle shoes, and mending retailer relationships. Since Gulden's tenure began, Adidas shares have outperformed those of Nike and Puma.

"2023 concluded better than I initially anticipated, although we still have significant room for improvement," Gulden remarked. Adidas anticipates a resurgence in its core business (excluding Yeezy) in 2024, projecting double-digit growth in the latter half of the year. Despite the 58 million euros loss, the first since 1992, Adidas plans to propose an unchanged dividend of 0.70 euros per share for 2023.

Facing competition and a downturn in sportswear demand, Adidas aims to recapture market share. This strategy emerges as Nike announced a 2% workforce reduction last month, citing declining demand. Adidas has seen success with the "terrace" sneaker trend, including low-rise suede models like the Samba and Gazelle, leading to an 8% increase in footwear sales in the fourth quarter, despite a 13% decline in apparel sales.

Industry analysts note a positive shift in Adidas's market positioning since Gulden assumed leadership. "Brand heat is increasing, and there's a noticeable reduction in the need to discount products," observed Thomas Joekel, a portfolio manager at Union Investment.

However, Adidas anticipates a sales decline in North America, its second-largest market, due to persistent overstocks. Conversely, a robust recovery is expected in China, with sales projected to grow at a double-digit rate following an 8% increase in 2023.

Adidas remains cautious about the outlook for the remaining Yeezy inventory, intending to sell these products "at least at cost." The recent release on February 26 met unpredictable demand, casting Yeezy sales as somewhat uncertain, according to Cristina Fernandez, an analyst at Telsey Advisory Group. Despite challenges, Yeezy sales generated 750 million euros in revenue and 300 million euros in profit last year. Additionally, Adidas has allocated 140 million euros to charities combating antisemitism and racism.

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