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Adidas Posts First Annual Loss in 30 Years, Faces North American Sales Decline

German sportswear giant Adidas announced its first annual loss in over three decades on Wednesday, citing challenges in the North American market amidst high inventories. The company, which has been striving to recover since cutting ties with Kanye West in October 2022, witnessed a suspension of sales for the lucrative Yeezy sneaker line.

Under the leadership of CEO Bjorn Gulden, Adidas embarked on a strategic revival plan, resuming sales of Yeezy sneakers to clear remaining stock while focusing on popular products like Samba and Gazelle shoes. Gulden's initiatives have led to a notable recovery in Adidas' performance, with its shares outperforming rivals Nike and Puma since his tenure began.

"Although by far not good enough, 2023 ended better than what I had expected at the beginning of the year," remarked Gulden, acknowledging the company's progress amidst ongoing challenges. Despite the positive strides, Adidas anticipates a continued weakness in North America, forecasting a sales decline of approximately 5% this year due to lower demand and excess inventory.

In the fourth quarter of 2023, Adidas reported a staggering 21% decline in North American sales, contributing to a 16% decrease for the full year. While the company expects its underlying business, excluding Yeezy, to improve in 2024 with double-digit growth in the second half, it acknowledges the uphill battle in reclaiming market share amid a declining appetite for sportswear globally.

Adidas has found solace in the trend for low-rise suede "terrace" sneakers like the Samba and Gazelle, witnessing footwear sales growth of 8% in the fourth quarter. However, apparel sales experienced a downturn of 13% during the same period.

Looking ahead, Adidas anticipates a stronger recovery in China, with sales projected to grow at a double-digit rate following an 8% increase in 2023. Despite facing its first net loss since 1992, the company's board intends to propose an unchanged dividend of €0.70 per share for its 2023 performance.

The fate of Adidas' remaining Yeezy products remains uncertain, with the company adopting a cautious approach and selling them "at least at cost." While Adidas has managed the sales successfully thus far, analysts remain cautious about the unpredictable nature of Yeezy demand.

Adidas, which generated €750 million in revenue from Yeezy sales last year, allocated €140 million for donations to charities combating antisemitism and racism. As the company navigates through turbulent waters, its resilience and strategic initiatives under Gulden's leadership continue to shape its trajectory in the global sportswear market.

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