22 November 2023, Mumbai
With the lifestyle footwear segment emerging as Adidas' top-selling category, the company is optimistic in Q3 of 2023 about the resurgence of its fashion reputation and improved profit margins.
After recent slowdowns, particularly in the apparel segments over the past couple of years, Adidas is banking on the success of lifestyle footwear to drive growth.
The footwear category, particularly the ‘Originals’ range featuring Samba and Gazelle styles, has experienced a robust currency-neutral growth of 6 percent. Despite cautious inventory management, demand often exceeded supply, resonating well with young, fashion-conscious consumers.
GlobalData, a London-based data analytics and consulting company, reports high profit figures in other Adidas footwear segments, including performance shoes for football and basketball. The latter category saw a boost with the introduction of NBA player Anthony Edwards' signature basketball shoe, the Adidas AE1.
The profit outlook remains positive with the impending launch of the Fear of God product range in the US market in Q4, contributing to the basketball segment's profitability.
On the flip side, apparel sales faced a decline of 6 percent, attributed to reduced demand in the current year after significant growth in 2022, driven by the media frenzy surrounding the FIFA World Cup.
Overall, Adidas reported a 6.4 percent decline in total sales for Q3 of 2023, amounting to approximately €6.0 billion. This downturn is more pronounced compared to H1, where the decline was 2.6 percent, a trend also observed among competitors such as Nike and Puma.
Yeezy, Adizero Adios Pro Evo 1 rope in profits
However, the third quarter marked a successful period for Adidas, attributed to a strategic focus on full-price sales and reduced discounting across most segments. Additionally, the decision to sell off the remaining Yeezy stock at the beginning of August 2023, following the brand's separation due to notorious antisemitism issues, contributed significantly, generating €350 million in sales.
Adidas also celebrated recent achievements, notably Ethiopian athlete Tigist Assefa setting a new women's marathon world record in Berlin, completing the race in two hours, 11 minutes, and 53 seconds while wearing the lightweight Adizero Adios Pro Evo 1 racing shoe.
Bjørn Gulden, the CEO of Adidas, expressed satisfaction with Q3 results, emphasizing progress and outcomes surpassing expectations.
The Terrace range, featuring Samba, Gazelle, and Spezial, along with other models like Campus, has been pivotal in driving growth in the lifestyle business. Despite scaling up supply, the company acknowledges it has not yet met the total current demand.
Gulden notes a growing interest in Adidas' brand and products across all markets, with retailers showing increased enthusiasm for the sell-in of the Fall/Winter 2024 range.
Hot competition in India
Taking a global perspective, India has emerged as a focal point in the last quarter. Latin America showcased resilience, and the Asia Pacific and Greater China regions experienced slight revenue growth, driven by the easing of lockdown restrictions in late 2022 and the increased spending power of the urban middle-class.
However, challenges persist in EMEA countries and North America due to inflationary pressures impacting Europe and the US.
In the Indian market, Puma has claimed the lead as the premier sportswear company, achieving a record revenue of over Rs 2,000 crore despite the post-pandemic challenges in 2021.
This success is attributed to a strategic emphasis on online channels and a heightened consumer interest in fitness.
In contrast, Adidas saw a 23 percent decline in revenue, dropping to Rs 945 crore in FY21 from Rs 1,228 crore in FY20. Other major players like Nike, Skechers, and Reebok also faced disappointing performances in FY21.
Looking ahead, Adidas is strategically focusing on making significant strides in the Indian market. The company is adopting a more calculated inventory approach with a strong emphasis on performance and lifestyle shoes, anticipating a promising outlook for the year 2024 in India.
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