Following today’s release of Adidas figures for the third quarter of fiscal 2022; Darcey Jupp, apparel analyst at GlobalData, a leading data and analytics company, offers her insight: “Another challenging quarter for Adidas has signaled that their troubles are far from over. While Adidas’ total reported revenue rose by a modest 11.4% to €6.4bn in the third quarter of fiscal 2022, this boils down to 4% growth without currency effects, and euro weakness it has a material effect on your top line. The sportswear specialist is struggling amid a drop in consumer demand, where it has lost competitiveness to rivals Nike and Puma, which are more in tune with its target audience. Now that inflation in its key markets has caused consumer demand to shrink further, Adidas has an inventory buildup, exacerbated by back orders from earlier in the year during the supply chain crisis. As a result, the brand has had to carry out more promotional activities than previously planned, which has affected its profitability.
“To add fuel to the fire, the highly publicized termination of its 10-year partnership with Yeezy following Kanye West’s anti-Semitic comments has forced Adidas to further lower its outlook for fiscal 2022, now expecting single-digit growth. low for the year, with an operating margin of c2.5%. Adidas claims that it is the sole owner of the design rights to existing Yeezy products, but should refrain from relaunching items under its own brand as they will always be synonymous with West, and this would likely result in less customer demand. New CEO Bjørn Gulden has a tough job ahead of him as the brand must find a suitable replacement to plug the hole of Yeezy’s lost revenue, but rival brand Puma’s success under Gulden’s leadership should spark some optimism for Adidas.
“The brand highlights September as the month that consumer demand began to deteriorate in both its Western markets and Greater China, and this was likely when more consumers in Europe began to feel pressure on their discretionary income due to spiraling inflation, and it coincided with the end of a packed summer of sports. Adidas’s struggles in Greater China are certainly the thorn in the side as sales in the region fell 26.6% on a currency-neutral basis to €937m in Q3 FY2022 amid ongoing challenges surrounding COVID lockdowns and a growing distaste for Western products, with many consumers preferring native brands like Li-Ning and ANTA who often celebrate Chinese culture in their designs.
“However, Adidas is right 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 teams, including Germany, Spain and Argentina, were well received by fans. As with all other tournaments, sales of these products will ultimately depend on the performance of the respective teams, but since this year’s World Cup is the first to be held in the Northern Hemisphere winter, Adidas stands to benefit from the tournament coinciding with the Gold Cup quarter, with soccer jerseys often a popular giveaway due to their higher price points.”