Can Adidas 'Sportswear' help plug the Yeezy-shaped hole in its finances?

Picture it now. Some accounting bod. in Herzogenaurach – Adidas’ German HQ – staring into the abyss that is the Yeezy shaped hole on its balance sheet. Parting ways with Kanye West and his brand, Yeezy, in November has blown a seismic hole in the brand’s financial statement.

The sportswear giant has prepared the market. It said, should the company decide not to sell or repurpose excess Yeezy stock, revenues would suffer by approximately £1.06 billion (€1.2 billion) and operating profit by approximately £441 million (€500 million) this year. If the decision materialised, the sportswear giant would expect to see an operating loss of £618 million (€700 million) in 2023.

This is a serious Yeezy hangover. Yeezy accounted for about 10% of Adidas' annual revenue last year and terminating the deal put a $246 million hit to its bottom line.

Yeezy accounted for 10% of Adidas sales

Adidas AG revenue for the twelve months ending September 30, 2022 was $24.23 billion, a 5.95% decline year-on-year. Adidas AG annual revenue for 2021 was $25.122 billion, a 10.83% increase from 2020. A lack of Yeezy products will also reduce operating profit by $534 million, with the company projected to break even this year. The warning regarding the revenue loss saw Adidas' stock price tumble. It has fallen 45% since the beginning of this year.

Thom Browne leaving court on 3 January 2023

Things haven’t been going Adidas’ way recently. A court case brought against Zegna-owned designer Thom Browne and the use of his four white stripes was thrown out by an American court. It was ruled that Thom Browne’s parallel stripe designs were "not likely to cause consumer confusion with Adidas' products", putting an end to the court trial. The fashion brand previously used a three-bar design on its clothing, however it switched to the four-stripe design after Adidas objected in 2007.

Hoping to fill the void, Adidas announced the launch of a new label, its first new label for 50 years. Unimaginatively called ‘Sportswear’ - you can just imagine the SEO confusion already - it’s had a distinctly underwhelming reaction.

You can see the headline, “Sportswear giant releases new label called ‘Sportswear’”. Where’s the punchline? There isn’t one. How many millions of euros and thousands of hours of focus groups went into the choice of this name? It’s a bit like Levi’s launching a new label called ‘denim’. It’s such a broad umbrella that it ends up being totally meaningless. Plus, we already know Adidas does sportswear. Duh.

Was it coming before the Yeezy fallout? If it wasn’t, it has been a very fast turn around from November. If it was, then it would have even less reason to exist.

‘Sportswear’ is not really a name to brag about for the hypebeast hungry label whores. It’s going to take explaining every time and even then you’re not sure what label the product sits in. Plus, haven’t we reached peak sportswear? Can it get much bigger? You’d think a clever brand would start thinking post sportswear, not try and own the whole category while giving us more of the same product.

The brand launched with a campaign featuring Jenna Ortega – star of Netflix series ‘Wednesday’. The range is targeting “the next generation’s adoption of a comfort-first mindset”, aka the never-leaving-the-house generation. Not exactly the aspirations of go-getters.

Aimee Arana, Adidas Global Manager, Sportwear and Training, said: “With consumer behaviour showing a noticeable change over the last few years, there’s no surprise that certain trends and desires are accelerating, particularly amongst the next generation. Taking this into account, we knew as a brand that we must adapt in a way that meets their needs, which is how and why Adidas Sportswear was born.”

Is this for Gen Z, Gen Alpha or both? Looking on Adidas’s website it is hard to differentiate the product and name from the thousands of other products on there.

Comfort is not going anywhere, but the new mood will be dressier while retaining the inner comfort. It has to be.

Adidas Sportswear won’t get generation Stock X excited and no doubt Adidas will be working on something more Yeezy-like to fill the vacuum, but when sportswear giants are try to control excess inventory – in October 2022 Adidas said it had “a significant inventory build-up as a result of lower consumer demand in major Western markets since the beginning of September,” as well as a traffic drop-off in the China market – you’d think more of the same would best avoided.