by 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 slogan – “you got this” – will replace Adidas’ previous saying, “nothing is impossible.”
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“There’s a lot of pressure out there and it’s a kind of ‘you have to do it’ or ‘something impossible’ too,” said Adidas chief executive officer Bjorn Gulden. “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 the Adidas headquarters in Herzogenrath, southern Germany. “But you ‘got this’ – if you want it.”
Gulden could just as easily be talking about the company he runs. In 2023, it became the second largest sportswear company in the world after Nike suffered its first loss in about 30 years. Adidas is still working to recover from the loss of its highly profitable Yeezy line. A long-term collaboration with musician Kanye West, also known as Ye, ended in late 2022 after West made several racist and anti-Semitic remarks.
Adidas had already predicted that it might not break even in 2023 but said on Wednesday that it did better than expected last year, even with results that disappointed market analysts. The last quarter of the year ended with Adidas sales falling 7.6 percent to 4.81 billion euros. For the entire year 2023, revenue fell by 4.8 percent to 21.43 billion euros.
If it weren’t for the Yeezy business, Adidas would have seen a 2 percent increase in currency-neutral revenue in 2023, the company said.
The results for the 4th quarter and for the full year, which Adidas had already shown in a preliminary statement in January, were below market consensus.
“These are not good results,” admitted Adidas chief financial officer Harm Ohlmeyer. “But there is a lot of progress in the story in 2023.”
In 2023, Adidas’ operating profit also fell 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 improved that outlook by around a billion euros, he said.
Part of this was certainly due to the sale of the remaining Yeezy product, which contributed 750 million euros to the company’s sales in 2023. The last Yeezy items will be sold in 2024 and should bring in around 250 million euros in, Adidas noted. The company has already set aside around 140 million euros for donations to charitable causes, to be distributed through the newly launched foundation, but this year’s Yeezy sales will be at cost and therefore will not contribute more to the pool donation, said Gulden.
The CEO also quashed rumors that Adidas could work with Ye again – these came after the publication of a picture of what Gulden says was a chance 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 optimistic about what it can achieve in 2024, as the company celebrates its 75th anniversary, and predicts currency-neutral revenue growth at a mid-single-digit rate. The first quarter of 2024 already looked better, Gulden said, and things should improve further in the second half of the year.
Market analysts from the likes of UPS and JP Morgan were cautiously optimistic, positively greeting the news of improvements in the first quarter of this year.
By 2026, Adidas had the plan to achieve double-digit growth and Gulden then talked about how he could do that; the former boss of Puma started working in Adidas at the beginning of 2023.
“Local relevance has become even more important than global relevance,” Gulden emphasized. “Gone is the time when you had a global option and tried to sell it everywhere. I think the mindset of production, creation, sourcing and even marketing needs to be as close as possible to the consumer. One way to do that is to work more closely with our retail partners.”
Localization is why Adidas is sourcing more products within 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 warned. “It’s much more economical to work with American retailers on what they want, rather than telling them what [you think] they want to.” 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 has always been a concern for Adidas. During the year, sales there fell by 16.1 percent, in currency neutral terms, to 5.22 billion euros and the market was particularly affected by the negative impact of Yeezy, the company explained. North America has fallen about six to nine months behind other territories, executives said, adding that they hope to see an improvement there soon.
Latin America is a much smaller market but there Adidas saw a growth of 21.6 percent, in currency neutral terms, and total sales of 2.29 billion euros.
In Adidas’ largest territory, its home market of Europe, the Middle East and Africa, sales fell by 0.4 percent, in currency neutral terms, in 2023. Adidas had sales of 8.23 billion euros in its home territory last year. Business looked better in Greater China and Asia-Pacific. In the fourth quarter of 2023 the company saw significant growth in Greater China of 36.8 percent, currency neutral. Part of this is likely due to China’s continued recovery from the COVID-19 lockdown 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 reached 3.19 billion euros and in Asia-Pacific they amounted to 2.25 billion euros. Gulden thinks that 2023 could be a “tipping point” for Adidas’ business in China, with the more productive and marketing stores possible again after the earlier boycott of Western brands.
In terms of Adidas product categories, footwear sales improved 4 percent last year, while apparel sales fell 6 percent and were adversely affected by high inventory levels, the company said in a statement.
“We started the year with a lot of bad inventory so we spent a lot of time clearing the 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 “almost clean inventory,” the executives said, with the U.S. market being the exception.
Over 2023, the company saw successful sales of so-called platform shoes, such as the best-selling Gazelle, Handball Spezial and Samba. Next up will be the SL72, a platform-like running shoe from the 1972 Olympics as well as bringing back one of Adidas’ most famous shoes, the Superstar. “In 2025, you will see collaborations and many activities around it [the Superstar],” Gulden promised.
Also coming up will be new lifestyle running shoes. “You’re going to start seeing some pretty creative — and I’d even say, dangerous — directions for lifestyle running,” Gulden said. “Not all of them will be successful but they will drive the brand creatively.”
Low-profile sneakers – that is, shoes with very flat soles – was a trend that was already being seen on runways and on celebrities and Adidas had some suitable styles that it also wanted to take advantage of this trend, with including from motor racing. and martial arts.
Although lifestyle and performance products are usually quite different, Adidas plans to incorporate more fashion into its performance segment in the future.
“There are two aspects to that,” Gulden told WWD. “If you go to the NBA and watch players come in and out of a game, it’s like a fashion show. That’s not the same in soccer. So you will see where the clubs and federations come from [Adidas] it will be 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 an Adidas tracksuit,” Gulden said.
The other reason for bringing a more fashionable look into performance wear is simply because the two blend anyway, the Adidas boss continued. “Fashion designers and creatives are already influencing the performance range more than before.”
Gulden predicted that sports such as tennis, track and field and golf would see a more fashionable look that consumers had not seen before, and that some sports teams might even be playing in special versions of the Adidas core. A collection of free lifestyles.
The famous Adidas three-stripe logo will also begin to appear in a more streamlined form, with the three stripes and the trellis on their own without the Adidas name underneath. “The visual language is very clear, very simple,” Gulden enthused. “To me, it’s like a modern Adidas.”
“As you can see we are spending a lot of resources to be visible with the new message,” Gulden concluded. “We put all our energy into getting the brand in front of the retailer and the consumer. That means we are overinvesting in marketing and product development. But I believe you need to have top momentum before you start optimizing your costs. Those of you who know me, know that I love to grow and then improve the business, by leveraging that momentum,” he said.
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