German sportswear giant Adidas reported its initial annual loss in over three decades on the 13th of March.

The company also cautioned about a further decline in North American sales due to the struggle faced by US sportswear retailers with excessive inventories.

Since severing ties with Kanye West in October 2022, Adidas has been striving to stabilize. This involved halting sales of the lucrative Yeezy sneaker line. Under CEO Bjorn Gulden’s leadership, the company resumed Yeezy sales to clear the remaining stock.

This year, Adidas predicts a continued weakness in North America, expecting sales to drop by approximately 5%.

Sportswear and apparel companies have been affected by decreased demand and overstocked stores in the US. Adidas noted a 21% decline in North American sales in the fourth quarter and a 16% drop throughout the year.

Gulden mentioned that clearing stock through outlet stores helped Adidas reduce inventories by 1.5 billion euros in 2023, a 24% decrease.

Adidas cited delays of two to three weeks in shipments due to the Red Sea crisis. Chief Financial Officer Harm Ohlmeyer warned of potential impacts on working capital if disruptions persist.

Adidas aims to regain market share from competitors amid a general decline in consumer interest in sportswear, leading to job cuts at Nike.

Adidas has benefited from the trend for low-rise suede ‘terrace’ sneakers like Samba and Gazelle. This trend drove an 8% increase in footwear sales in the fourth quarter, though apparel sales fell by 13%.

Investors noted positive progress under Gulden’s leadership, with increasing brand heat and reduced need for discounts.

Last year, Adidas generated 750 million euros in revenue from Yeezy sales, resulting in a 300 million euro profit. The company allocated 140 million euros for donations to charities fighting antisemitism and racism.

Despite the net loss of 58 million euros, the board of Adidas plans to propose an unchanged dividend of 0.70 euros ($0.7650) per share based on its 2023 performance.