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Adidas' Samba and Gazelle shoes succeed, North America underperforms


Adidas Samba Gazelle succeed N. America underperforms

Adidas had strong Q1 results, with sales growth in Europe and China. However, North America was weak due to overstocked shelves.

Adidas is recovering from the loss it suffered in 2023 when rapper Ye's separation caused their successful Yeezy shoe line to stop, resulting in financial losses. However, the company's "terrace" shoe lines, like the Samba and Gazelle, have recently increased in favor. According to Bjorn Gulden, CEO of Adidas, sales were driven by the leisure division in the first quarter, and demand for terrace shoes continued to rise. Revenues from shoes increased by 13% during the quarter.

Adidas used to be an undesirable brand, but now it has gained momentum and is doing well, according to Marcus Morris-Eyton, a portfolio manager at AllianceBernstein. Adidas's stock, which has increased 25% so far this year, fell 1% in early trading. Adidas has benefited from the decline of its main American rival, Nike, which has lost market share and issued a sales warning. According to creator and CEO Moses Rashid, sales of Adidas shoes, which are usually less expensive, have increased by 80% from the previous year, while sales of Nike shoes have decreased overall by about 30% on the marketplace The Edit LDN, where sneakerheads purchase and sell limited-edition footwear.

Adidas sales went up by 8% in China and 14% in Europe, but sales decreased by 4% in North America to $1.20 billion (1.12 billion euros). Adidas is facing surplus inventory issues in the US, just like other retailers. As a result, it has reduced prices to sell off the merchandise. As predicted, the U.S. sales performance was dismal, but Europe was significantly stronger, according to Deutsche Bank analyst Adam Cochrane, who found comfort in the wide geographic distribution of the sales performance.

Adidas reduced its clothing and shoe inventory by 22% compared to last year. Adidas said its gross margin increased by 6.4 percentage points to 51.2%, while sourcing expenses decreased. Operating margin increased to 6.2% from 1.1% in 2023's first quarter.

According to Morris-Eyton, Adidas has successfully reduced its discounting, and terrace shoes are a high-margin item. The trajectory to return to double-digit EBIT margins is on track.

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