BERLIN - Reporting 2023 financial results, executives from German sportswear giant Adidas on Wednesday laid out their new direction for the company's global marketing efforts. A new motto - "you got this" - will replace Adidas' previous slogan: "impossible is nothing."
More from WWD"There is a lot of pressure and this 'you just have to do it' or 'do something impossible' is also a kind of pressure," said Adidas CEO Bjorn Gulden. "The company's attitude should be youthful and optimistic. So we think it's a very positive message because you all have your pressures and your difficulties," he told reporters at Adidas headquarters in Herzogenrath, southern Germany. "But 'you have this' - if you want it."
Gulden might as well talk about the company he runs. In 2023, the world's second-largest sportswear company 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-running collaboration with musician Kanye West, also known as Ye, ended at the end of 2022 after West made a number of racist and anti-Semitic statements.
Adidas had previously forecast it might not break even in 2023, but said Wednesday it performed better than expected last year, even as results disappointed market analysts. The last quarter of the year ended with Adidas's turnover declining by 7.6 percent to 4.81 billion euros. For the whole of 2023, revenues fell by 4.8 percent to 21.43 billion euros.
If not for Yeezy, Adidas would have seen currency-neutral sales grow 2 percent in 2023, the company said.
The results for both the fourth quarter and the full year, which Adidas had already announced in a preliminary statement in January, were below market consensus.
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"These are not good results," admitted Harm Ohlmeyer, Adidas's chief financial officer. "But the story in 2023 is about great progress."
In 2023, Adidas' operating profit also fell significantly: by 59.9 percent from 669 million euros to 268 million euros. But, as Gulden pointed out, Adidas had originally forecast an operating loss of around 700 million euros in 2023. That year's result meant that Adidas had actually improved that outlook by around a billion euros, he said.
Part of this was certainly due to sales of the remaining Yeezy product, which added €750 million to the company's revenue by 2023. The last Yeezy goods will be sold in 2024 and should generate around 250 million euros, Adidas noted. The company has already set aside about 140 million euros for donations to charities, to be distributed through the recently launched foundation, but Yeezy's sales this year will be at cost and therefore add nothing to the donation pool, Gulden said.
The CEO has also quashed rumors that Adidas might work with Ye again. These came after the publication of a photo of what Gulden said was a chance encounter with Ye at an airport recently as Gulden returned from watching the Super Bowl.
Gulden then outlined plans to help Adidas grow again without the profitable line.
The German sportswear giant remains positive about what it can achieve in 2024, as the company celebrates its 75th anniversary, and forecasts currency-neutral sales to grow by mid-single digits. The first quarter of 2024 was already looking better, Gulden said, and things should improve further in the second half of the year.
Market analysts from UPS and JP Morgan, among others, were cautiously optimistic and welcomed the news of improvements in the first quarter of this year.
The plan was for Adidas to achieve double-digit growth by 2026 and Gulden then spoke about how he could achieve that; the former Puma boss started working at Adidas in early 2023.
"Local relevance has even become more important than global relevance," Gulden emphasizes. "The time when you had a global range and tried to sell it everywhere is over. I think the mentality of production, creation, purchasing and even marketing should be as close to the consumer as possible. One option for this is to work more closely with our retail partners."
Localization is why Adidas is sourcing more products in China and India and has established a design office in Los Angeles, he explained, and is working more closely with U.S. retailers.
"The difference between Europe and America is bigger than people think," Gulden warned. "It's much more beneficial to work with US retailers about what they want, rather than telling them what [you think] they want." That's why design for American street culture and American sports like basketball and football should come from Los Angeles and not Herzogenrath, he argued.
In 2023, the North American market remained a concern for Adidas. Over 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 is about six to nine months behind other areas, executives said, adding that they hope to see improvement there soon.
Latin America is a much smaller market, but Adidas saw growth there of 21.6 percent, in currency-neutral terms, with sales totaling 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. Things in Greater China and Asia Pacific looked better. In the fourth quarter of 2023, the company saw significant growth in Greater China of 36.8 percent, currency neutral. Some of this was likely due to China's continued recovery from the COVID-19 lockdowns in 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 amounted to EUR 3.19 billion and in Asia Pacific, sales amounted to EUR 2.25 billion. Gulden believes 2023 could have been a "turning point" for Adidas' Chinese operations, with stores more productive and marketing possible again after an 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 hit hard by high inventory levels, the company said in its statement.
"We started the year with a lot of bad stock, so we spent a lot of time clearing out the stock," Gulden explains. Ultimately, the company managed to reduce inventory levels by about 1.5 billion euros, Ohlmeyer said. This means Adidas will start 2024 with "a nearly clean inventory," executives said, with the exception of the U.S. market.
In 2023, the company saw successful sales of so-called patio shoes, such as the best-selling Gazelle, Handball Spezial and Samba. Next would be the SL72, a terrace-style running shoe from the 1972 Olympics, as well as the return of one of Adidas' most famous shoes, the Superstar. "In 2025 you will see collabs and a lot of activations around it [the Superstar]", Gulden promised.
New lifestyle running shoes are also on the way. "You're going to see some pretty creative - and I would even argue risky - directions in the running lifestyle," Gulden said. "They won't all be successful, but they will drive the brand from a creative point of view."
Low-profile sneakers - that is, shoes with a very flat sole - were also a trend already seen on catwalks and among celebrities, and Adidas had a number of suitable styles that it also started using to exploit this trend, including in motorsport. and martial arts.
While lifestyle and performance products tend to be fairly different, Adidas also plans to incorporate more fashion into its performance sector in the future.
"There are two elements to this," Gulden told WWD. "When you go to the NBA and see players going in and out of a game, it's like a fashion show. It hasn't been the same in football. So you will see what the clubs and federations get out of it [Adidas] will become more and more fashionable."
For example, the Real Madrid football team was currently traveling in a special Y3 collection, the collaboration between Adidas and Yohji Yamamoto. "Not in Adidas tracksuits," Gulden said.
The other reason for introducing more fashionable looks into performance clothing is simply because the two merge anyway, the Adidas boss continued. "Fashion designers and creatives are already having a greater impact on performance reach than before."
Gulden predicted that consumers would soon see more fashionable looks in sports such as tennis, athletics and golf that had not been seen before, and that some sports teams might even play special versions of Adidas' integral sport. lifestyle collection, Originals.
The famous Adidas three-stripe logo will also appear in a more streamlined form, with the three stripes and trefoil on their own without the Adidas name underneath. "The visual language is very clear, very simple," says Gulden enthusiastically. "To me it looks like a new, modern Adidas."
"As you can see, we are spending quite a bit of resources to be visible with the new message," concludes Gulden. "We have put all our energy into bringing the brand to the attention of retailers and consumers. This does mean that we invest too much in marketing and product development. But I believe you need to have momentum on the top line before you start optimizing your cost levels. Those of you who know me know that I love to drive growth and then improve the business by leveraging that momentum," he stated.
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