The interest rate increases around the world, the Russia-Ukraine war and the fact that China was closed to the West due to the Corona virus – all of these were among the main factors that affected the performance of the world’s biggest sports fashion players in 2022.
While the revenues of the two leaders of the category, Nike and Adidas, increased by 4.98% and 6% respectively, Puma, in third place, recorded a 24% jump in revenues. Foot Locker, whose revenues this year are similar to those of Puma, recorded a decrease of 0.6%.
According to the companies’ reports, it is clear to all of them that what was is not what will be, and they are thinking of a new course for the coming years.
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Nike: strong online
For Nike, the leader of the category, 2022 was the best year in terms of sales since 2005. If before the corona virus, in 2019, its annual revenues were 39.1 billion dollars, in 2020 there was a slight drop to 37.4 billion dollars, and in 2021 sales rose to 44.5 billion dollars – this year it is already 46.7 billion dollars.
Nike is known for sparing, to put it mildly, its advertising and sales promotion expenses. In 2022, these expenses amounted to no less than 3.11 billion dollars. On the face of it, this is a worthwhile expense, but it was also affected this year by global events.
The company was among the first brands to take a stand, when it announced in early March 2022 that it was suspending its online operations in Russia. At the same time, like its competitors, it faced the closure of the Chinese market due to the corona virus (it only opened in January of this year) – recall that most of the company’s shoes are produced in Vietnam (44%), Indonesia (30%) and China (20%), while most of the fashion production is carried out in Vietnam (26%), in China (20%) and Cambodia (16%).
And what are the goals of the company? Throughout the year, Nike emphasized in its advertising the increase in its online sales. Recently, CEO and President John Danhoe said that the company wants to reach 50% of sales online by 2025. In addition, the company will put emphasis on Generation Z and Generation Alpha in China – the next generations of its customers in a huge market that is very important to it.
Adidas: strengthening the wholesalers
The German Adidas produced a whopping 419 million pairs of shoes in 2022, but ended the year with revenues of 22.5 billion euros, which was an increase of only 1% compared to 2021. The operating profit was only 669 million euros, compared to about 2 billion euros in the year passed
Two fundamental factors affected the results: the currency differences and the drop in the company’s performance in China – where revenues fell by 36% compared to 2021. In the bottom line, the company recorded a loss of 281 million euros, compared to a loss of 133 million euros in 2021.
But the Adidas story is much more complex than numbers, and is also related to image and strategic focus. Since the end of 2013, Adidas collaborated with the American rapper Kanye West and together with him created the street fashion brand YEEZY – which was a success, and at the peak reached sales of one billion dollars a year.
YEEZY shoe by Adidas and Kanye West / Photo: Shutterstock
However, last October the idyll and the profits came to an end: following a series of anti-Semitic statements by West, Adidas announced that it was renouncing the partnership between the parties. This move had clear financial consequences, since Adidas was “stuck” with shoes worth 1.2 billion euros. The company even warned investors that the move cost it 600 million euros in the last three months of 2022.
However, according to the reports coming from Adidas, in recent weeks these shoes have become a collector’s item in the US, and they are being sold for $340-360, compared to the original price of $260. The company is considering diverting the proceeds to a donation.
And what is expected for 2023? Adidas predicts that the decline in revenues will continue, as long as the macroeconomic challenges and geopolitical tensions continue. The company is aware that there is a risk of a recession in Europe and North America, and the uncertainty surrounding China’s recovery.
“2023 will be a transition year for building the base for 2024 and 2025,” says Adidas CEO Bjorn Golden. Return the focus to our core: product, consumers, retail partners and athletes.”
Until now, Adidas’ business model has focused on both wholesale and DTC (direct to customer). However, last month, during a conversation with investors following the publication of the reports, Adidas CEO Bjorn Golden referred to the growth from wholesale sales versus the slowdown in direct sales. “The business model will be more oriented towards wholesale,” said Golden. DTC with us will decrease.”
Puma: Again in basketball
The third largest player is Puma, which concluded 2022 with revenues of approximately $9 billion and a profit of $385 million – a 14% increase compared to 2021. In terms of sales, the most successful category was shoes, with a 31% increase compared to 2021. Clothing increased by about 10%, and the accessories by 5%. While in Asia there was a decrease in sales, in America as a whole there was an increase of about 28%.
According to Puma CEO Arne Freundt (who took office in January 2023, but has been with the company for a decade), “2022 was a record year for Puma. We have accelerated our growth across all product categories and globally, despite a volatile market environment – thanks to our team and our partnerships with athletes, retailers and suppliers.
“As we face the economic winds of 2023, we will focus on increasing the strength of our brand, and increasing our market share in the US and China.” According to the company’s reports, the increase in share in the US will come, among other things, from a renewed entry into the basketball industry and new partnerships – among other things with French fashion brand Balmain.
Foot Locker: closing stores
Another notable actress worth paying attention to her year is the American Foot Locker. 2022 was not good for it – its sales decreased by 0.6% compared to 2021 and amounted to 8.75 billion dollars. However, if you look only at the fourth quarter, the decrease in revenue stands at 0.3%, and when you take into account only the sale of the same stores (those that also existed in 2021), an increase of 4.2% is recorded.
The recovery is related, among other things, to the rethinking of stores: the company closed about 100 stores, changed 45 stores (for example, changed locations) and opened 21 new ones. Today it operates about 2,700 stores in 29 countries, and has another 160 franchised branches in Asia and the Middle East (in Israel, for example, it operates through Harel Wiesel’s Fox Group).
A branch of the FOOT LOCKER chain / Photo: Shutterstock
In 2024, Pot Locker will celebrate its 50th anniversary, and the company is talking about the “laces program” which aims to increase sales in 2024-2026 by 5%-6%, while in identity stores the expectation is for an increase of 3%-4%.
In other words: Foot Locker puts Yahava on new paths. It is reducing its operations in Asia (for example, closing its operations in Hong Kong and Macau), exiting the shopping malls, and announced that by 2026 it will close another 400 stores (!) – mainly in the US.