Editorial credit: Robert Way / Shutterstock.com
Executive Summary:
Adidas has reached a settlement with Ye, the artist formerly known as Kanye West, closing a challenging chapter for the brand. This update accompanied Adidas’ Q3 report, which showcased a 7.3% year-over-year increase in net sales, reaching $6.9 billion. CEO Bjørn Gulden credited the positive performance to strategic momentum and a “summer of sport” that amplified brand visibility, featuring major events like the Paris Olympics. Revenue from Yeezy products, however, has significantly decreased as Adidas continues to phase out the partnership.
In Q3, Adidas achieved a gross margin of 51.3% and a remarkable 70% increase in net income, which was partly supported by a $100 million boost from the Yeezy settlement. The company also saw strong growth in wholesale and direct-to-consumer channels, with Adidas-owned stores posting double-digit increases. However, e-commerce revenue dropped by 3%, attributed to reduced Yeezy inventory, though excluding Yeezy, e-commerce growth exceeded 25%, driven by a decrease in discounting and a focus on full-price sales.
As Adidas moves forward, it faces the challenge of sustaining this momentum. Analysts are concerned about the lasting appeal of its legacy Samba and Gazelle “Terrace” sneakers. While Adidas explores new concepts, like women-focused stores in Saudi Arabia and Dubai, analysts speculate that an anticipated new product launch from Nike could impact Adidas’ market position if the brand does not diversify its product portfolio.
