On Wednesday, Adidas (ADDYY) came out with its Q4 earnings. The German sports apparel company reported revenue of 5.23 billion euros, beating analysts’ expectations of 5.17 billion euros. However, the company posted an operating profit of 129 million euros, lighter than the 141.3 million euros expected.
Adidas has fallen on some tough times as of late. In an earnings call Tuesday morning, Dick’s Sporting goods (DKS) announced that it is ending its licensing agreement with Adidas-owned Reebok to make room for its own brand of athletic apparel.
In addition, Adidas says that issues with its supply chain might cause 2019 sales to lag behind those of 2018 by as much as 3 percentage points.
The German shoemaker also seems to have a retro problem. It ushered in the latest retro sneaker fad with re-releases of the classic Stan Smiths and the Adidas Superstars. Matt Powell of NDP Group says that sales of the two shoes are down substantially in 2019. And this all comes as Nike (NKE) is riding the retro train to major profits, while Adidas has been trying to lean more on its Kanye West–led Yeezy sneaker line with the once ultra-exclusive sneakers are becoming more widely available. CEO Kasper Rorsted has said that the brand is "changing the business model” as far as the line is concerned.
“In a normal year, we’ll have between 20 and 30 launches of Yeezy products, where it used to be around two or three.”
Rival Nike has been turning up the heat for some time. Nike has been able to adapt by creating new product lines centered around women’s wear as well as debuting a controversial ad campaign in September of 2018 featuring former NFL star turned activist Colin Kaepernick which played huge role for the company’s resurgence.
Perhaps Adidas’s biggest challenge is getting customers excited on its home front. European sales slid in 2018. According to Adidas, sales in Europe have decreased at a mid-single-digit rate.
A part of the slide has been the ability of rival Nike to make waves in the soccer market and capitalize on the strong World Cup performances of Nike-sponsored teams, including uniforms of the two tournament finalists, France and Croatia.
"There is no doubt that development in Europe was a disappointment for us in 2018, and we have taken appropriate steps to address the issue, and we expect Europe to come back to growth at the end of 2019. But it's clear also with the size of Europe, it has a negative impact in our overall growth rate. So the 8% comes despite the non-contribution from our Europe organization," CEO Kasper Rorsted said during a recent earnings call.
So where does Adidas go from here? Rorsted believes there are multiple things Adidas can do to turn its fortune around, including focusing more on casual styles and sportswear as well as e-commerce, Rorsted told CNBC.
"There is no doubt e-commerce and e-commerce through a mobile environment is the future of our company."
However, the news is not all bad for Adidas. According to its latest financial report, the company saw an increase of 17% in North America and has doubled its North America business in three years.
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade
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