Adidas AG (OTC:ADDYY) has seen a surge in sales thanks to its Samba and Gazelle shoes, despite a decline in North American sales.
What Happened: Adidas' first-quarter sales in Europe and China have contributed to a 14% and 8% increase respectively, while North America, its second-largest market, experienced a 4% decrease, Reuters reported.
The company's sales have been driven by the popularity of its "terrace" shoes, including the Samba and Gazelle, following a challenging period after the termination of its lucrative Yeezy shoe line.
Adidas' CEO, Bjorn Gulden, attributed the strong first-quarter sales to the lifestyle business, with demand for terrace shoes continuing to grow. Footwear revenues increased by 13% over the quarter, despite a 1% drop in Adidas' shares during early trading.
Adidas has capitalized on the weakening of its main U.S. competitor, Nike Inc. (NYSE:NKE), which has lost market share and warned of a sales decline. On the sneakerhead marketplace, The Edit LDN, sales of Nike shoes have decreased by approximately 30%, while Adidas shoes, typically lower priced, have surged by 80% from the previous year.
"It is reassuring to see the broad geographic spread of the sales performance, with the U.S. weak as expected but a much stronger Europe," said Adam Cochrane, analyst at Deutsche Bank.
Why It Matters: This surge in Adidas' sales comes after a challenging period. The company reported a loss in 2023 after ending its Yeezy shoe line, which had been highly profitable. However, the recent sales boost from its terrace shoes has been a significant turnaround for the company.
Adidas' Q1 results come on the heels of a strong start to the year, with an 8% increase in currency-neutral revenues and a 4% growth in euro terms. The company's gross margin also improved by 6.4% points to 51.2% during the quarter, compared to 44.8% the previous year.
Despite the challenges, Adidas has been optimistic about its future, targeting growth amid inventory and currency challenges at the start of 2024. The recent surge in sales, particularly in Europe and China, suggests that the company's strategies are indeed paying off.
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