The results were not unexpected. Adidas had already released preliminary figures for sales in 2022 and reported growth of 1 percent, in currency neutral terms, to bring in 22.51 billion euros ($23.75 billion) last year.
The official figures, released by the German sportswear giant on Wednesday morning in Europe, showed how heavily the last three months of 2022 weighed on that figure.
Over the first nine months of the year, Adidas sales had actually been going up. But in Q4 last year, Adidas revenues fell 1 percent, in currency neutral terms, to 5.2 billion euros ($5.5 billion).
“This development reflects the negative impact of around 600 million euro [$633 million] related to the company’s decision to terminate the Yeezy partnership at the end of October,” Adidas said in a statement, referring to the company’s split with long-time collaborator, musician Kanye West, otherwise known as Ye, after his increasingly erratic behavior.
Ongoing sales declines in the Greater China region – around 50 percent in the fourth quarter – because of COVID-19 lockdowns, geo-political tensions and what Adidas called ” company-specific challenges,” also made a significant dent in Q4 revenues. Adidas made 520 million euros ($549 million) in sales there in the last three months of 2022, compared to 1 billion euros ($1.06 billion) over the same period the previous year.
This resulted in a total of 3.18 billion euros ($3.36 billion) in revenue from Greater China over the whole of 2022, a decrease of 36 percent altogether, currency adjusted. Adidas had previously focused on the Chinese market as a major potential source of new customers.
Elsewhere in the Asia Pacific region, Adidas’ revenues actually grew 4 percent, currency adjusted, in 2022, to 2.24 billion euros ($2.36 billion).
In a statement, the German sportswear giant’s new boss, Bjørn Gulden, looked to the future – the former Puma chief only took on the job in December and has a difficult job ahead of him. Gulden said that “2023 will be a transition year to build the base for 2024 and 2025. Adidas has all the ingredients to be successful. But we need to put our focus back on our core: product, consumers, retail partners and athletes.”
In other markets, the brand performed far better. The fourth quarter saw revenues grow in Adidas’ home market of Europe by 12 percent and in the North American market by 6 percent, in currency adjusted terms. This resulted in increases of 9 percent in Europe and 12 percent in North America for the whole year, and revenues of 8.55 billion euros ($9.02 billion) and 6.4 billion euros ($6.76 billion) in those markets respectively.
Sales in Latin America powered ahead 44 percent, currency adjusted over the year, to 2.11 billion euros ($2.23 billion) over the whole year.
In terms of product categories, footwear continued to be Adidas’ biggest seller, with sales rising 3 percent, currency adjusted, over 2022, to hit 12.29 billion euros ($12.97 billion). Although a much smaller category, accessories sales also rose, up 19 percent, currency adjusted, to 1.5 billion euros ($1.58 billion).
Apparel seemed to be a more difficult sector for the second-biggest sportswear company in the world. In this category, sales were static in 2022, with revenues of 8.73 billion euros ($9.21 billion) in 2022. The previous year, apparel had brought in 8.71 billion euros ($9.19 billion) in revenues.
The results for the fourth quarter were slightly above what market analysts had expected but in line with the general consensus. More significant for the market was the fact that, given the difficult circumstances, Adidas planned to slash its dividend. Last year, the brand paid out 3.30 euros ($3.48) a share and this year it said it would likely only pay 0.70 euro ($0.74).
Adidas had already set out its grim forecast for 2023 in February and reiterated those expectations on Wednesday morning, predicting revenues would decline in the high-single digits during the year.
“Elevated recession risks in Europe and North America as well as uncertainty around the recovery in Greater China continue to exist,” the company said. High inventory levels are a problem, as is what to do with remaining Yeezy-related products. The guidance for 2023 reflects a potential loss of 1.2 billion euros ($1.27 billion), should the Yeezy stock not be able to be sold, Adidas noted.