Linda Paschini and Helen Reed
(Reuters) – Sales growth in Europe and China helped Adidas (OTC:) deliver strong first-quarter results, while North America was a weak spot as retailers remained overstocked, the German sportswear brand said on Tuesday.
Adidas has been on a turnaround since a devastating split with rapper Ye discontinued its highly profitable Yeezy shoe line and reported a loss for 2023, but the company’s sales have surged recently on the popularity of its “terrace” shoes such as the Samba. and Gazelle.
Adidas CEO Bjorn Gulden said its lifestyle business boosted sales in the first quarter and that demand for patio shoes continued to grow. Revenue from footwear sales increased 13% in the quarter.
“Adidas went from being a brand that no one wanted to touch to a brand that had all the positive momentum behind it,” said Marcus Morris-Ayton, portfolio manager at AllianceBernstein (NYSE:), which holds Adidas shares in its European growth fund.
In the US, like other retailers, Adidas is struggling with excess inventory and cutting prices to keep products off retailers’ shelves.
Revenue in North America, the second-largest market, fell 4% year-on-year to 1.12 billion euros ($1.20 billion) in the first three months of 2024, but that was an improvement from a fall of more than 20%. in the last quarter of 2024. 2023.
Sales rose 14% in Europe and 8% in China.
Overall, “much healthier” inventory levels and lower purchasing costs helped boost Adidas’ gross margin by 6.4 percentage points to 51.2%, the company said.
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“The path to returning to double-digit EBIT margins is on track,” Morris-Ayton said, adding that Adidas has been able to reduce discounting and patio shoes are a strong gross margin product.
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