Adidas posted its first annual loss in more than 30 years as it joined Nike in the struggle to get shoppers splashing out on expensive new trainers.
The German sportswear company lost £50million in 2023, swinging from a £217million profit it made the year before.
Bjorn Gulden, Adidas chief executive, who took the helm at the start of last year, said the results were ‘by far not good enough’.
The results came as its biggest competitor Nike has warned of weaker demand and has decided to push ahead with a cost-cutting programme.
High inflation and interest rates have hit retailers hard as customers have sought ways to cut back spending on high-priced goods.
Disgraced: Rapper Kanye West (pictured), who changed his name to Ye in 2021, came under fire for a series of anti-semitic social media posts in late 2022
In December, Nike outlined a £1billion savings plan over the next three years, which included tightening the supply of products and cutting out management levels.
And last month Nike said that it would be laying off 2 per cent of its workforce – more than 1,600 jobs – as it hopes to drive down costs.
But the story is even gloomier for Adidas, which has been grappling with its own messy break-up with the rapper Kanye West.
West, who changed his name to Ye in 2021, came under fire for his anti-Semitic social media posts in late 2022.
Adidas quickly ended its lucrative Yeezy footwear partnership with the rapper and left £1billion worth of shoes in limbo.
At the time, Yeezy shoes were accounting for nearly half the company’s profits.
But nearly two years on Adidas continues to pay a heavy price for the bust-up.
The company said yesterday that total revenues were down around 5 per cent at £18billion in 2023.
The discontinuation of the Yeezy deal with the rapper prompted a £427million hit in sales during 2023.
And this pushed the group to post its first full-year loss since 1992 – a year in which the firm was facing a leadership crisis and growing competition for market share.
Nonetheless, Gulden, 58, has vowed to pull the company out of this rut and make Adidas a ‘good company again’.
The Norwegian-born industry veteran was poached for the chief executive role in January 2023.
His mission was to deal with the Yeezy crisis and he had experience in the industry having headed major rival Puma for nearly ten years before that.
And analysts have praised his direction for the group in the face of a difficult and uncertain economic backdrop.
‘Things have clearly been going in the right direction at Adidas since Bjorn Gulden took over,’ said Thomas Joekel, who is the portfolio manager at Union Investment.
‘Brand heat is increasing, which can also be seen from the fact that fewer products now have to be sold at a discount,’ he added.
Victoria Scholar, the head of investment at Interactive Investor, said: ‘His decision to ramp up production of Samba and Gazelle trainers last year has proven to be a successful move, with investors cheering his decision-making.
‘The stock performed very well last year, sharply outperforming Nike and Puma.’ Gulden also made the bold move at the end of last year to sell off the remaining stocks of Yeezy sneakers for at least the price it cost to make them.
The company said that this ploy had added £641million to sales in the final two quarters of last year.
It set aside £120m for donations to charities fighting anti-Semitism and racism.
Looking ahead, Gulden appears to be focused on cashing in on a recovery in the Chinese market as the US equivalent continues to drag for consumer demand.
‘2023 was a turning point for the business [in China],’ Gulden told journalists.
‘We feel a lot more comfortable about China than we did 12 months ago.’
Adidas shares climbed 3.8pc yesterday and they are now up nearly a fifth since Gulden joined, while Nike and Puma are both trading down.
Deutsche Bank said that while there were no surprises in Adidas’s results, 2024 would be ‘another transition year’ for the company.
‘All eyes are on the future prize and the building blocks to get there,’ they said.
But the company is crucially fighting for market share with its biggest rival Nike.
