adidas‘ new era under CEO Bjorn Gulden appears to be accelerating. The sportswear giant beat expectations with its first-quarter results, showing an 8% increase in sales over the same period last year. This positive performance comes on the heels of a challenging 2023, which saw the company grapple with the end of its Yeezy collaboration and its first annual loss in three decades.
So how did adidas manage to beat expectations in Q1? Several factors contributed. First, the company tackled its inventory issue head-on, reducing excess inventory by a significant 20%. This not only streamlined operations, but also freed up resources for strategic marketing investments, which increased by 56 million euros compared to Q1.
Second, a renewed focus on product innovation and localization paid off. adidas capitalized on the current trend for “terrace shoes”, footwear traditionally worn by British football fans, and saw a surge in demand, particularly among younger demographics. In addition, the company prioritized regional preferences with collaborations and product launches tailored to specific markets.
Third, core product categories such as high-end performance and lifestyle apparel experienced significant growth. This reflects a shift in consumer behavior and an opportunity for Adidas to leverage this momentum in the mid-market segment. While apparel sales grew at a slower pace, Gulden was optimistic, pointing to positive inventory trends in North America.
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While the global picture was rosy, North America remained a cause for concern. Sales in the region declined slightly due to pre-existing inventory issues and lower consumer demand. However, with a 40% reduction in inventory, adidas is poised for a comeback in the second half of the year. The brand also plans to refocus on popular American sports such as basketball to further strengthen its presence in North America.
Elsewhere, the news was much better. Sales in Greater China, Latin America, Japan/South Korea and emerging markets all showed impressive growth, demonstrating the brand’s global strength. In Europe, adidas’ largest market, sales also grew a healthy 13.8%.
The positive Q1 performance goes beyond sales. adidas’ earnings before interest and taxes increased significantly versus the prior year. This financial resilience allowed the company to raise its full year guidance to mid- to high-single-digit sales growth.
