Adidas has reported strong growth in Greater China during the third quarter of 2024, defying broader trends in the retail sector where many companies are grappling with weak consumer demand. The German sportswear giant’s performance in this key market reflects a strategic pivot and an improved brand image, particularly in North America, despite some challenges related to its previous partnership with Kanye West, now known as Ye.

The company announced a 9% increase in currency-neutral quarterly sales, reaching 946 million euros ($1 billion) in Greater China—its highest quarterly sales since early 2022. This surge contrasts sharply with rival companies that are facing sluggish consumer demand and a longer-than-expected wait for government stimulus measures aimed at boosting market confidence. Bjorn Gulden, Adidas’ CEO, expressed satisfaction with the brand’s performance in China during a recent conference call, highlighting the company’s ability to capture market share while improving profitability for both itself and its retail partners. Gulden also forecasted potential sales growth of 10% or more in the fourth quarter, signaling strong momentum heading into the holiday season.

The company’s success in China is attributed to its tailored approach to product design and marketing. Adidas has opened over 200 stores in smaller Chinese cities, aiming to reach 300 by year-end. This strategy not only enhances its visibility in underrepresented markets but also allows the brand to compete more effectively with local players. Felix Dennl, an analyst at Metzler in Frankfurt, noted that Adidas’ decision to design products specifically for the Chinese market has significantly contributed to its strong performance.

In stark contrast, Nike has struggled to maintain its foothold in the region, as indicated by recent market analyses. This competitive landscape has led to Adidas gaining an advantageous position, with retail analysts acknowledging the brand’s ability to resonate with local consumers. The brand’s focus on nostalgic models, particularly its Samba and other “terrace” shoes inspired by 1970s and 1980s soccer fans, has also helped to bolster its market share.

Despite the positive outlook in China, Adidas faces ongoing challenges in North America, its second-largest market. The company reported a 7% decline in currency-neutral sales, totaling 1.36 billion euros for the third quarter. However, when excluding sales from the controversial Yeezy line, the company saw a 1% year-on-year increase. This mixed performance highlights the impact of the brand’s previous partnership with Ye, which culminated in a series of legal disputes that the company has now resolved. Adidas settled with Ye in the third quarter, allowing it to clear remaining Yeezy inventory, which generated approximately 200 million euros in revenue—down from 350 million euros during the same quarter last year.

Adidas’ wholesale business showed promising growth, with revenues rising 13% in the third quarter, while direct-to-consumer sales increased by 7%. The company has successfully taken shelf space from Nike in multi-brand retail environments, such as Foot Locker and JD Sports, thanks to a growing trend for its vibrant, multi-colored sneakers. This strategic maneuver is indicative of Adidas’ broader efforts to enhance its brand presence and adapt to changing consumer preferences.

In response to rising expenses tied to sponsorships of major sporting events, including the Olympics and the UEFA European Championship, Adidas increased its overall marketing expenditures by 12% to 724 million euros for the quarter. As a percentage of sales, marketing and point-of-sale expenses rose by 0.5 percentage points to 11.2%, reflecting the brand’s commitment to maintaining visibility in a competitive marketplace.

Looking ahead, Adidas is positioned to continue its growth trajectory, particularly in markets where it has effectively aligned its offerings with consumer preferences. By focusing on localized product designs, expanding its retail footprint, and strategically managing its brand image, Adidas appears well-equipped to navigate the challenges of a dynamic global market. The company’s ability to respond to consumer trends while addressing previous setbacks demonstrates its resilience and commitment to long-term success.

(Adapted from TBSNews.net)