Adidas reports first annual loss in over 30 years amid North American sales warning

German sportswear giant Adidas revealed its first annual loss in more than three decades, citing challenges in the North American market and ongoing supply chain disruptions.

The company's CEO, Bjorn Gulden, highlighted the persisting struggles in the US, foreseeing a further decline in sales for the region amidst inventory management issues plaguing sportswear retailers.

The setback comes as Adidas grapples with the aftermath of severing ties with Kanye West in 2022, resulting in the suspension of sales for the lucrative Yeezy sneaker line.

Since assuming leadership, CEO Bjorn Gulden has embarked on a strategic overhaul, focusing on reviving key product lines like the Samba and Gazelle shoes while fortifying relationships with retailers.

Despite these efforts, Adidas anticipates a challenging year ahead, projecting a 5 per cent decline in sales for North America.

The company reported a significant drop in fourth-quarter sales, with North American sales plummeting by 21 per cent, contributing to an overall 16 per cent decline for the fiscal year.

The adverse impact of inventory management issues was palpable, prompting Adidas to implement measures to alleviate the situation.

Through the clearance of stock via outlet stores, the company managed to reduce inventories by 1.5 billion euros in 2023, marking a notable 24 per cent decline.

However, lingering challenges persist, exacerbated by shipment delays stemming from the Red Sea crisis.

Chief Financial Officer Harm Ohlmeyer indicated potential implications on working capital should the disruptions persist, signalling further headwinds for the company.

Despite the setbacks, Adidas remains optimistic about its prospects, banking on a resurgence in key markets such as China and anticipated growth in its underlying business, excluding the Yeezy line.

The company expects a double-digit sales increase in China following an 8 per cent uptick in 2023.

Additionally, Adidas aims to bolster its market position by capitalising on consumer trends favouring low-rise suede sneakers like the Samba and Gazelle, which have witnessed increased demand.

(With inputs from Reuters)