By Helen Reid
LONDON (Reuters) -Adidas struck an optimistic note on Wednesday as it reported a drop in inventory levels, saying retailers are “visibly” more interested in its fall/winter 2024 range as the German sportswear giant seeks to boost its brand’s appeal.
CEO Bjorn Gulden, in the job since Jan. 1, has been driving a turnaround at the company bruised by last year’s break-up with rapper Kanye West, who goes by Ye, which left Adidas with unsold Yeezy shoes worth 1.2 billion euros ($1.3 billion).
Inventory levels were down 23% year-on-year at 4.85 billion euros ($5.18 billion), a little more than expected, Adidas said. Apparel and footwear retailers in the United States and elsewhere are overstocked and slashing prices to help move products off the shelves.
Adidas last month lifted its full-year outlook, partly due to the positive impact of the release of Yeezy shoes during the second and third quarter.
Adidas’ gross margin for the quarter was up 0.2 percentage points at 49.3%, supported by reduced freight costs and fewer discounts.
“Adidas’ competitive position compared to Nike is improving,” said Robert Schramm-Fuchs, portfolio manager at Janus Henderson, which holds Adidas shares.
Gulden has been focused on building stronger relationships with its wholesalers after previous management prioritised its own stores and website, Schramm-Fuchs said.
“Adidas needs to earn back the shelf space, but I think they have the right product to do it,” he said.
But the shift in focus onto wholesale also comes as newer running and lifestyle brands increase competition.
“Hoka, On Running, and others are taking space in some of the more premium sports retailers,” said Adam Cochrane, analyst at Deutsche Bank.
Currency-adjusted sales in North America fell 8.8%, while sales in EMEA grew nearly 2% and Greater China saw a 5.7% jump.
North American sales were dented by reduced sales to wholesalers there, Adidas said, adding that high inventory levels in the United States would continue to impact its business “for a while”.
Footwear revenue grew 6% over the reported quarter while apparel sales declined by 6%, a trend seen across the sportswear industry as shoppers prioritise more essential purchases.
($1 = 0.9359 euros)
(Reporting by Miranda Murray in Berlin and Helen Reid; Editing by Maria Sheahan, Sherry Jacob-Phillips and Catherine Evans)
