Tough times ahead for Adidas as termination of Yeezy deal puts further pressure on its bottom line, says GlobalData – Retail Times


Following today’s release of Adidas’ third quarter fiscal 2022 figures; Darcey Jupp, Apparel Analyst at GlobalData, a leading data and analytics company, comments: “Another challenging quarter for Adidas signaled that its problems are far from over. While Adidas’ total reported revenue grew moderately by 11.4% to €6.4 billion in the third quarter of fiscal 2022, it narrowed to 4% growth on a neutral in currencies, the weakness of the euro having a significant effect on its turnover. The sportswear specialist is struggling amid declining consumer demand, where it has lost competitiveness to rivals Nike and Puma that are more in tune with their target audience. Now that inflation in its key markets has caused consumer demand to contract further, Adidas has a buildup of inventory, exacerbated by delayed orders from earlier in the year during the supply chain crisis. As a result, the brand had to do more promotional activities than expected, which hurt its profitability.

To add fuel to the fire, the high-profile termination of its 10-year Yeezy partnership after anti-Semitic comments from Kanye West forced Adidas to further cut its outlook for fiscal 2022, now expecting growth. at low single digits for the year, with an operating margin of c2.5%.Adidas says it is the sole owner of the design rights to existing Yeezy products, but it is expected to refrain from relaunching items under its own brand, as they will always be synonymous with West, which would likely result in muted customer demand.New CEO Bjørn Gulden has a difficult task ahead as the brand needs to find a suitable replacement to fill the missing revenue hole from Yeezy, but the Rival brand Puma’s success under Gulden’s leadership should give Adidas some optimism.

“The brand highlights that September is the month when consumer demand started to deteriorate in both its Western markets and Greater China, and that’s likely when more consumers in Europe started to feel the pressure on their discretionary income due to soaring inflation, and this coincided with the end of a busy sporting summer.Adidas’ struggles in Greater China are certainly the thorn in its side, as the sales in the region fell 26.6% on a currency-neutral basis to €937 million in the third quarter of fiscal 2022, amid continued challenges from COVID lockdowns and growing distaste for Western products, with many consumers favoring local brands such as Li-Ning and ANTA which often celebrate Chinese culture in their designs.

“Nevertheless, Adidas has reason to be optimistic about the upcoming FIFA Men’s World Cup, with the brand noting that it has already seen an increase in demand after its new kits for many top-flight teams, including Germany, Spain and Argentina, have been well received by Fans.As with all other tournaments, the sales of these products will ultimately depend on the performance of the respective teams, but like the World Cup of this year being the first to take place in winter in the northern hemisphere, Adidas can benefit from the tournament coinciding with the gold medal quarter, with football shirts often a popular gift given their higher prices.


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