Business

Sportswear giants are dealing with obstacles

Sportswear giants are dealing with obstacles

Ffollowing a series In the wake of anti-Semitic outbursts in October, rapper and fashion entrepreneur Kanye West (who insists on being called Ye), boasted that Adidas would never take it down. Within days, the German sportswear giant proved him wrong, ending a lucrative seven-year relationship. Mr. West’s Yeezy line of sneakers added 1.5 billion euros ($1.5 billion) to Adidas’ revenue in 2021, or 12 percent of its total footwear business. The company’s share price fell to lows not seen since 2016 after the announcement. On November 9, Adidas cut its profit forecast for the fourth time this year. The previous day he appointed new CEO Bjorn Gulden to clean up the mess.

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Mr Gulden, who helped turn around German arch-rival Puma Adidas, will have to deal with more than just misbehaving pop stars. Like the rest of the $300 billion-a-year global sportswear industry, Adidas is grappling with supply chain problems, inflation-driven cost increases and an economic slowdown in its biggest markets. The soccer World Cup, which begins in Qatar on November 20, is also unlikely to provide the usual boost to sales, with many shoppers pinching pennies.

The most immediate problem for sportswear companies is their inventory. As consumers in their forties embraced hoodies and tracksuit bottoms, companies ramped up production of sportswear. Last June Nike, the American industry heavyweight, confidently predicted 10% annual revenue growth through 2025 and sales that year of $50 billion. Instead, the company cuts prices to dispose of unsold stock. It now expects revenue to grow 5% or more a year.

A longer-term problem is the shift away from sports and into fashion. As well as making the company vulnerable to the whims of mercurial pop stars, it has put them in competition at the fashionable end of the market, where luxury labels are shoe sellers, and at the sports end, where upstart companies offer innovative products that appeal to shoppers’ evolving sensibilities on issues such as athletic performance and the environment. On Running, a Swiss brand owned by tennis legend Roger Federer, makes shoes from beans and has launched a subscription service to replace and recycle well-worn kicks. In March Lululemon Athletica, the athleisure label, launched its first collection of shoes. DESPERATELY It claims to have reinvented running shoes with its dense cushioning.

However, the competition in the fashion market looks more like a battle for companies that have signed up on the field than on the catwalk, said John Kernan of Cowen, an investment bank. Some are already returning to their sporting roots. Puma’s success under Mr. Gulden, a former professional soccer player in his native Norway, has much to do with its focus on gear for lesser-known sports such as cricket and motor racing. Adidas will be hoping to make similar stylish shoes.

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