Adidas Bounces Back

Adidas, founded by Adolf Dassler, stands as Europe’s largest sportswear manufacturer and the world’s second-largest after Nike. Originally co-founded with his elder brother Rudolf, their split saw Rudolf establish Puma, sparking a historic rivalry that propelled both brands to global prominence, shaping the sportswear industry into a multi-billion-dollar industry.

In recent years, Adidas has encountered significant challenges affecting its financial performance and strategy. Economic downturns, marked by rising inflation, recession risks, and currency fluctuations, have dampened consumer spending across key markets like North America and Europe, squeezing the company’s revenue and profit margins. High inventory levels, particularly in North America and Greater China, led Adidas to apply steep discounts to clear stock, further impacting profitability. Additionally, geopolitical tensions added to the strain; notably, Adidas’s decision to exit the Russian market due to the conflict in Ukraine resulted in substantial revenue losses and logistical setbacks, as Russia had been a strong market for the brand.

The biggest blow came in October 2022, when Adidas ended its high-profile partnership with Kanye West, whose Yeezy line had been a major profit driver. This separation was projected to cost Adidas around €1.2 billion in revenue and had left the company with surplus Yeezy stock, adversely affecting sales and online performance.

To address these challenges, Adidas implemented a series of strategic initiatives that delivered a quick and fascinating recovery.

Under CEO Bjørn Gulden’s leadership, the brand refocused on profitability and operational improvement, with the “Own the Game” strategy at its core. This plan prioritised direct-to-consumer (DTC) sales and digital transformation, targeting 50% of sales from DTC channels by 2025. This shift allows Adidas to strengthen consumer connections through enhanced e-commerce capabilities and expand the adiClub loyalty programme across nearly 50 countries.

Adidas has also actively managed high inventory levels through targeted discounting while updating product lines to align with current trends. Classic styles like the Samba, Gazelle, and Campus saw a resurgence, supported by timely releases and collaborations, reconnecting the brand with lifestyle and streetwear audiences.

Adidas further refreshed its offerings with new products, such as the Adizero Adios Pro Evo 1 racing shoe, which has gained attention in major marathons, helping to re-establish the brand’s standing in the athletic community.

These efforts have begun to show results, as Adidas reported a 7.3% increase in net sales, reaching €6.43 billion (£6.94 billion) in the third quarter of FY24, compared to €5.99 billion in Q3 FY23.

Gulden commented on the performance: “The third quarter was very strong and exceeded expectations. With 14% underlying growth for the Adidas brand, a robust gross margin above 51%, and an operating profit of €598 million, we’re on the right track. I’m particularly proud to see growth across all regions, channels, and product divisions.”

“There are many ways to get brand heat, but unfortunately there’s not a phone number that you can call and say, ‘I want more brand heat!’ It’s the sum of everything we do. It’s athletes. It’s teams. It’s federations. It is of course celebrities. It’s street culture, but also here, it is very, very local. And we need to have people in the different markets as close as we can to the consumer to make sure that we invest where it really makes sense. And of course, try to get as much brand heat as we can. And as you know, Adidas has always been able to come back again when the brand has been down and I’m convinced we will do it again,” he added.

With a renewed focus on brand relevance, consumer engagement, and strategic adaptation, Adidas is steadily navigating its way back to strength. Despite recent setbacks, the company’s commitment to innovation, classic appeal, and localised market strategies has laid a strong foundation for sustainable growth.

Adidas performs better than expected in transition year 2023 – Adidas Group. adidas. (n.d.). https://www.adidas-group.com/en/media/press-releases/adidas-performs-better-than-expected-in-transition-year-2023

Focus Areas. adidas Annual Report 2023. (n.d.). https://report.adidas-group.com/2023/en/group-management-report-our-company/focus-areas.html

MSN. (n.d.). https://www.msn.com/en-us/money/companies/adidas-net-sales-and-profits-surge-in-q3-fy24/ar-AA1tdpOA

Ryan, T. J. (2023, March 8). Exec: New adidas CEO discusses turnaround strategy. SGB Media Online. https://sgbonline.com/exec-new-adidas-ceo-discusses-turnaround-strategy/

Wikimedia Foundation. (2024, November 2). Adidas. Wikipedia. https://en.wikipedia.org/wiki/Adidas

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