Adidas CEO: ‘You Have to Be More American to Be Successful in America’
Adidas has faced challenges in North America, with a notable 7% decline in sales during Q2. However, CEO Bjørn Gulden remains optimistic, emphasizing the importance of embracing American sports to drive success in the region.
An Adidas storefront in New York. CEO Bjørn Gulden said the company is sharing product with wholesale partners in tandem with its DTC channels. Cara Salpini for Retail Dive
Strong Global Performance Despite North American Setback
Adidas' global performance in Q2 has been impressive. The company reported a 9% increase in net sales, reaching 5.8 billion euros ($6.3 billion). Operating profit surged by nearly 97%, reflecting a robust overall financial health. For the first half of the year, Adidas saw a 6.2% rise in sales to 11.3 billion euros, with operating profit soaring by nearly 190% to 682 million euros. Net income for the quarter grew by 117% to 206 million euros.
Navigating North American Challenges
Despite the decline in North American sales, Gulden noted a 2% growth in the underlying business in the region, marking the first positive change in a considerable time. This growth is part of Adidas' broader strategy to reposition itself more favorably in the American market.
Strategic Shifts and New Leadership
Adidas has been steadily eliminating its Yeezy inventory, selling about 200 million euros worth of Yeezy merchandise in the quarter. This effort, while essential, has temporarily buoyed the company's top line. The company still has 150 million euros of Yeezy inventory left. However, the discontinuation of Yeezy has affected brand desirability in North America, according to Alice Price, an associate apparel analyst at GlobalData.
To counteract this, Adidas is focusing on American sports and culture. The company has appointed former WNBA player Candace Parker as the president of its women’s basketball division and extended its contract with NBA player Anthony Edwards. Adidas is also developing a product pipeline tailored to the U.S. market, including baseball and American football gear.
"You have to be more American to be successful in America. You have to be in the American sports," Gulden stated. He highlighted the company’s strategic plan to increase its presence in American sports, aligning product pipelines and marketing activities accordingly.
Eurocentric Criticisms and Progress
Adidas' Eurocentric approach has been a point of criticism, particularly in comparison to its competitor, Nike, which has a stronger foothold in North America. However, Gulden pointed out recent successes in the region, driven by strong product launches. These launches have strengthened trust with wholesale partners, contributing to a 17% increase in wholesale sales for the quarter. Wholesale now accounts for 59% of Adidas’ sales, compared to 41% from direct-to-consumer (DTC) channels.
"We do not prioritize our own DTC just because we can have a higher margin," Gulden said. "We make sure our retail partner gets the product at the same time, and in this quarter, we even gave them more of the good stuff to please them. If not, we would not have been able to grow them 17%."
Product Category Performance
In terms of product categories, Adidas saw a 17% increase in footwear sales on a currency-neutral basis, a 6% rise in apparel, and an 8% decline in accessories. These figures indicate a significant turnaround, especially in lifestyle footwear, which has played a crucial role in restoring the brand's relevance and appeal.
Conclusion
Adidas' Q2 performance highlights both challenges and opportunities. While North American sales have dipped, the company's strategic shifts towards embracing American sports and culture, coupled with strong global performance, paint an encouraging picture for the future. As Gulden noted, being "more American" is key to Adidas' success in the U.S., and the company’s focused efforts in this direction are beginning to show promise.