Adidas Is Doing Better Than the Competition Because of ‘Luck, Timing, Hard Work’

After A didas saw revenues rise 11 percent to 5.82 billion euros in the second fiscal quarter, the company’s chief executive officer Bjørn Gulden tried to explain why the brand was doing better than expected.

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The second-quarter results meant that in the first half of 2024, the company has already notched up sales of 11.28 billion euros, a 10 percent increase at constant exchange rates, year-on-year. Earlier in July, Adidas raised guidance for the year. It now expects growth in the high-single digits for all of 2024, rather than in the mid- to high-single digits.

“We said 2023 was about just breaking even and building a base for the future, and we said we would start to improve our performance in 2024,” Gulden said. “I think it’s fair to say we are ahead of where we expected to be, and we’re very happy about that.”

Adidas shares rose as a result of the second-quarter numbers on Wednesday and analysts, who greeted what they described as “robust growth,” were quick to comment on the fact that competitors like Nike and Puma were not doing as well.

Gulden’s explanation was straightforward: “Good luck, good timing and hard work,” is how he put it during an online press conference Wednesday morning discussing the results.

In terms of luck, Gulden was referring to “things that are happening around us that point in our direction.” By that he meant major sports events this year, including the UEFA and Copa América football tournaments, the Paris Olympics and the Paralympics. While the impact of sports events on sales is often hard to judge empirically, Gulden said the company had already sold 5 million replica football jerseys — more than it expected — as a result of the two major soccer tournaments.

When it comes to Gulden’s comment on timing, this was mostly about Adidas’ lifestyle category — which comprises Adidas Originals, basketball, skateboarding and partnerships. The category grew 16 percent and is where brand momentum is currently being built, the CEO explained.

A lot of the lifestyle product had been launched at the right time to take advantage of the ongoing trend for what are known as “terrace” shoes, such as the retro Samba, Handball, Gazelle and Campus models. Demand was still growing for these, in all their different permutations, he noted.

Over the second quarter, Adidas footwear sales rose 17 percent, on a currency neutral basis, and the popularity of these lifestyle shoes were also — somewhat surprisingly — making up for the loss of the company’s highly profitable Yeezy business, Gulden pointed out.

Adidas ended its relationship with the musician Ye, formerly Kanye West, in 2022. The end of the collaboration and the Yeezy line has dragged on Adidas’ accounts but the traumatic chapter should come to an end this year. So far in 2024, remaining Yeezy stock has brought in 350 million euros, the German company said. It now only expects to sell another 150 million euros worth of Yeezy this year, then the product line will end.

So it’s not really about “Yeezy drops” anymore, Gulden told journalists. “It’s about getting the [Yeezy] products onto market, wherever they are, in the best possible way, and getting rid of that during the year.”

In fact, Gulden said, taking Yeezy out of the equation, the Adidas lifestyle category looked even better, sitting at around 34 percent growth.

The company would continue to capitalize on the popularity of its lifestyle category and would be moving to exploit the growing “low-profile” fashion trend later this year.

“We think that will be a trend next summer that will be very visible on our — and also on other brands’ — consumers,” he said, referring to ultra-flat sneakers originally made for sports like auto racing and martial arts.

After that, Adidas plans to release more inventive lifestyle-oriented running shoes in 2025, alongside a new push for the brand’s bestseller Superstar shoe.

Over the second quarter, Adidas apparel sales also increased, by 6 percent.

Adidas trackpants and tops have been very visible on the street, Gulden noted, adding that his marketing team has also had some success hyping up retro soccer jerseys and taking “football style to the streets, even after the soccer events and into 2025.”

The increase in apparel sales makes perfect sense, Gulden says, given how these tend to follow on from growth in footwear sales.

Accessories was the only product segment Adidas where didn’t see growth. The category fell 8 percent during the second quarter and Gulden conceded the company likely needed to work on the product segment, even though he did expect some improvement later this year.

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During the press conference, Gulden also addressed several of the recent controversies that Adidas had been challenged by.

The German sportswear giant recently made headlines for a marketing campaign featuring Bella Hadid that did not appear to have fully considered hyper-sensitivity around the conflict in the Gaza Strip, as well as for allegations of corruption at its Chinese headquarters.

A marketing campaign for the SL72 sneaker saw Hadid, who has Palestinian roots, unintentionally associated with the 1972 Olympics where Palestinian terrorists had killed Israeli athletes. Gulden said this was a very unfortunate mistake.

“We made a mistake in the way that bits and pieces in this campaign were put together,” he argued. “When you do a mistake, you apologize and you move on. That’s what we did there and there’s nothing more to add.”

Asked whether the company might be doing anything to prevent errors like this in the future, Gulden answered that naturally there was an internal review after an issue like this. But in terms of protocols or external experts, there’s nothing that could be put in place that could prevent errors like this which, one might argue, also depended on political circumstances.

Meanwhile Hadid was definitely still a “friend of the brand,” he said, and being paid as her contract with Adidas stipulated. As far as Gulden was aware, the supermodel was not planning any lawsuit against the company.

As for the alleged corruption at Adidas in China, Gulden felt this had been “heavily exaggerated.”

An investigation using both internal and external experts had been carried out there, he said. “And yes, they found some things that were not compliant. But not in the millions and not in the size that it looks in the press,” he stated. In June, two employees related to the case were let go.

Overall, though, Adidas was very happy with the Chinese market, Gulden continued. The company had reversed a negative trend there and was now taking market share there, he noted.

During the second quarter, Adidas saw growth in Greater China , Japan and South Korea. In China, Adidas revenues grew by 9.3 percent to 822 million euros, and in Japan and South Korea they were up 5.8 percent to 321 million euros at constant exchange.

In Adidas’ home market of Europe, revenues rose 19.4 percent, at constant exchange rates, to 1.91 billion euros.

Sales in Emerging Markets increased by 24.6 percent in the quarter to 749 million euros.

In North America, sales sank 7.7 percent to 1.3 billion euros at constant exchange. The U.S. market has been lagging for Adidas in general because it has been “over-inventoried and very promotional,” Gulden explained.

But, as the CEO also pointed out, subtract the drag from the loss of Yeezy in the U.S. and Adidas’ core business there actually grew 2 percent. This was why the company was optimistic about its North American prospects going into next year, Gulden said.

The company also increased its EBITDA — earnings before interest taxes, depreciation and amortization — by 48 percent to 1.18 billion euros during the first half of 2024.

However Gulden said Adidas was not about to increase its prognosis dramatically again this year. “Don’t expect us to double our outlook,” he cautioned.

“We have improved faster than we thought…the product coming in the next quarters is strong, we have a very healthy order book and I think you see the consumer is actually trending toward our brand,” Gulden explained. “But you also need to understand that growing 16 percent is not that easy [for a company our size]. At our size, there are limitations on logistics and actually making the product, so you need to be careful — and that’s why we are still conservative about the way we talk about the next two quarters.”

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