German sports equipment manufacturer Adidas returned to profit in the first quarter of 2024, thanks to strong demand for its classic sneakers, after the void left by the end of the collaboration with rapper Kanye West (or Ye). The group’s net profit at the end of March reached 170 million euros, compared to a loss of 39 million euros in the first quarter of last year.
Adidas’ January-March sales were boosted this year by the popularity of vintage sneakers from the Terrace collection, including the Samba, Gazelle and Campus models. They filled a void left after the abrupt fall 2022 end of the Yeezy sneaker line, a thick-soled shoe created in collaboration with rapper Ye. Adidas stopped this collaboration after comments from the American considered anti-Semitic.
Last year, the unsold stocks of this model were valued at 1.2 billion euros and Adidas has managed to get rid of them to date making a profit, partly donated to NGOs. Contrasting with a minimalist design and a fine semelle of caoutchouc, the Terrace collection “a mieux fonctionné qu’attendu à la fois sur le volume et sur le calendrier”, s’est félicité le patron du groupe, Bjørn Gulden, lors d’une phone conference.
Avoid “overheating” the brand
In the same type of casual footwear, the Superstar model, one of the three stripes brand’s best sellers, will be relaunched, but according to a schedule still subject to postponement. This launch plan is planned for “late 2024 and early 2025”, but could be delayed given that the Terrace collection models are “very good”, Gulden reported.
It is about avoiding “overheating” the brand, so the activation of the Superstar will be planned “based on our needs and those of retailers,” he added. Total group sales, excluding currency effects, increased 8% year-on-year in the first quarter, driven by all regions with the notable exception of North America, where they fell 3.6%.
“High levels of apparel inventory, particularly in the North American market, continued to result in lower sales to wholesalers,” Adidas said in a statement.
In the group’s other two major markets, sales increased by almost 14% in Europe and almost 8% in China, in local currency. As already reported in mid-April, turnover in euros increased by 4% in the first quarter, to 5.5 billion euros, and the gross margin improved 6.4 percentage points, to 51.2%.
Operating profit reached 336 million euros, compared to a loss of 60 million euros the previous year. In its sales and profit forecast for 2024, confirmed on Tuesday, the Herzogenaurach group assumes that the sale of the remaining stock of Yeezy sneakers for the rest of the year will be carried out on average at cost.
Source: BFM TV
