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Business

Adidas reports strongest China sales since early 2022

Published by Uma Rajagopal

Posted on October 29, 2024

Featured image for article about Business

By Linda Pasquini and Helen Reid

(Reuters) -Adidas saw strong growth in Greater China in the third quarter, while sales in North America excluding Yeezy shoes were up on the year thanks to improving brand image, the company said on Tuesday.

Its performance in China contrasts with other companies that are struggling with weak consumer demand and a likely longer wait for government stimulus measures to boost confidence.

Currency-neutral quarterly sales rose 9% to 946 million euros ($1 billion) in Greater China, up from 870 million a year earlier, its strongest quarterly sales in China since the start of 2022.

Adidas’ outperformance in China is down to underlying brand momentum, its local-for-local (or locally designed) approach and flexibility with respect to in-season development,” Felix Dennl, analyst at Metzler in Frankfurt, told Reuters.

Last week China’s biggest sports retailer Topsports noted Adidas’ resilience in terms of its stock selling out, discount levels, and consumers’ appetite for new launches, and said Nike has by contrast been lagging, Dennl added.

Adidas shares gained 1.7% in early trading, despite a filing that announced top shareholder Groupe Bruxelles Lambert had cut its stake. Adidas had already released preliminary figures and hiked its annual sales and profit guidance earlier this month.

A trend for Adidas’ Samba and other “terrace” shoes – retro models inspired by soccer fans’ footwear in the 1970s and 80s – has helped it gain market share over rivals such as Nike and recover from a bruising break-up with rapper Kanye West, who goes by Ye.

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In North America, Adidas’ second-biggest market behind Europe, the Middle East and Africa, currency-neutral sales were down 7% at 1.36 billion euros in the third quarter, but increased from the previous year when excluding Yeezy, the company said.

The results are the latest evidence of a revival in Adidas’ fortunes almost two years after CEO Bjorn Gulden joined. Gulden has overseen the sales of Adidas’ stock of Yeezy shoes left unsold after cutting ties with the rapper, its former design partner.

Adidas’ wholesale business – revenue made by selling product through third-party retailers – grew 13% in the third quarter, while direct to consumer sales grew 7%.

The company’s gross margin increased by 2 percentage points compared with a year ago to 51.3% – an impressive result, Jefferies analysts said, given wholesale is generally less profitable.

Adidas has taken shelf space from Nike at multi-brand retailers such as Foot Locker and JD Sports thanks to the trend for its multi-coloured sneakers, while its U.S. rival has seen sales fall.

Spending on the Olympic Games and Euros soccer championship drove Adidas’ overall marketing expenses up by 12% to 724 million euros in the quarter. As a percentage of sales, marketing and point-of-sale expenses were up 0.5 percentage points to 11.2%.

($1 = 0.9252 euros)

(Reporting by Linda Pasquini in Gdansk; Editing by Alison Williams and David Holmes)