After a strong rally between 2015 and 2017, the Adidas brand has performed so far this year less well in Europe generally than Nike, Puma or Under Armour. In the third quarter, its sales in Western Europe were off by one percent in euros and by two percent in constant currencies.
The management attributed this mainly to a drop in the sport-inspired lifestyle segment of its offer, due to softer-than-expected sales of legacy sneaker styles like the Stan Smith and the Superstar and the slow ramp-up of new styles in the same category. The introduction of new sneaker franchises has been met with mixed results.
The resurrection of the Continental 80, a classic trainer from the late 1980s, continued to be successful. The release of bulky silhouettes from the 1990s in new colors, like the Falcon and the Yung1, performed well, in line with the bulky sneaker trend. The management has been less happy with the Prophere. The new Deerupt has had a slow start, and another new style, the P.O.D, has not met expectations.
Conversely, Adidas' collaboration with Carbon on 4D-printed shoes like the AlphaEdge has attracted a lot of attention, and the company has decided to raise its availability at retail by a factor of ten. The older Ultra Boost franchise continues to grow at a double-digit rate, and a new generation of styles will be introduced early next year.
Citing questionable decisions around product launches, mistakes in timing and underwhelming marketing campaigns, the similarly poor score reached in Western Europe during the second quarter led the group to appoint a new management for the region, which actually encompasses most of Europe (SGI Europe Vol. 29 n°27+28 of Aug. 17).
Besides an excessive reliance on the Adidas Originals segment, the continued slowdown in Western Europe was also blamed this time on a somewhat “ambitious” pricing policy, which, on the other hand, helped the group's gross margin to grow by 3.4 percentage points to 48.8 percent in Europe. Accordingly, selective price adjustments will be made in the region, and the company will invest more in the wholesale segment to regain shelf space.
Overall, sales in Western Europe declined by 1 percent to €1,508 million for the Adidas brand and by 6 percent to €137 million for the Reebok brand, with currency-neutral declines of 1 and 5 percent. The operating profit in the region rose by only three percent to €401 million.
More in SGI Europe.