Adidas (ADSGn.DE) announced a decrease in inventory levels on Wednesday. Still, it also expressed optimism, stating that retailers are “visibly” more interested in its fall/winter 2024 collection as the German sportswear giant looks to increase the appeal of its brand.
Since taking over as CEO on January 1st, Bjorn Gulden has been leading a turnaround at the company, which has suffered because of the split from rapper Kanye West, also known as Ye, last year, which left Adidas with unsold Yeezy sneakers valued at 1.2 billion euros ($1.3 billion).
According to Adidas, inventory levels were higher than anticipated, dropping 23% annually to 4.85 billion euros ($5.18 billion). Retailers of clothing and shoes, both domestically and internationally, are overstocking their stores and lowering prices to clear inventory.
Adidas increased its full-year projection last month, in part because of the favorable effects of the Yeezy shoe launch in the second and third quarters. Adidas’s gross margin increased by 0.2 percentage points to 49.3% during the quarter, helped by lower freight and fewer discounts.
“Adidas is becoming more competitive when compared to Nike,” stated Robert Schramm-Fuchs, portfolio manager at Janus Henderson, the company that owns Adidas stock.
After prioritizing its stores and online under the previous administration, Gulden has been concentrating on strengthening its ties with its wholesalers, according to Schramm-Fuchs.
“Adidas needs to earn back the shelf space, but I think they have the right product to do it,” he stated. However, the increased competition from more recent running and lifestyle companies has also caused a change in attention to wholesale.
Adam Cochrane, an analyst at Deutsche Bank, stated, “Hoka, On Running, and others are taking space in some of the more premium sports retailers.”
In North America, currency-adjusted sales decreased by 8.8%, while sales in EMEA increased by over 2% and in Greater China increased by 5.7%.
Adidas stated that lower sales to wholesalers in North America had hurt company sales and that the country’s high inventory levels would continue to affect its operations “for a while.” As consumers prioritized more necessary purchases, the sportswear business saw a 6% fall in garment sales during the reporting quarter, while footwear income increased by 6%.
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