If Kanye West’s Yeezy brand is indeed a “unicorn on its way to becoming a deca-corn,” as tweeted by the performer in late April, his footwear collaboration with Adidas doesn’t seem to be bringing much to the table.
(West following a long social media hiatus also recently took to Twitter to declare his status as “currently the single highest paid person in footwear. That means I make more money on shoes than Michael Jordan.”)
But during a conference call with journalists on Thursday, Kasper Rorsted, chief executive officer of Adidas AG, suggested Yeezy contributes more in terms of halo effect than bottom-line results. Adidas has been collaborating with West since 2013.
“From a financial standpoint, [Yeezy] has no impact on the overall financial results of the company,” Rorsted said describing the collaboration as “an important asset from a [marketing] standpoint,” the way it resonates with consumers, and the “brand heat” generated by its limited releases.
When asked to comment on the brand’s relationship with the performer following controversial remarks made by West on the subject of slavery in the U.S. during an interview on TMZ Live, Rorsted said that, regarding the brand’s creators: “There are clearly some remarks that we don’t support, but it is not our policy to comment on every statement that is made by people that are related to our company.”
Keeping the focus on business, Rorsted said that an 18.6 percent rise in first-quarter net profit at Adidas was driven by double-digit top- and bottom-line growth in its strategic focus areas: North America, Greater China — which saw a 26 percent increase in sales, outperforming the market — and e-commerce, with 1.5 million people signing up to the brand’s new shopping app.
Rorsted revealed that Scott Zalaznik has joined the company as senior vice president digital and will oversee the acceleration of the company’s digital transformation. Zalaznik cut his teeth at Spring and has held positions at xAd, Global.com and Michael Kors. He reports to Eric Liedtke, executive board member at Adidas.
Citing “a more balanced profile” between the brand’s lifestyle and performance lines, the executive said that women’s continues to see double-digit growth and now represents 25 percent of the Adidas business.
Sales at Reebok dipped 3 percent due to declines in the training and running categories, but the brand swung to growth in North America “for the first time in many years.”
Impacted by ongoing sanctions, the group expects to continue to see a depressed economy in Russia, he said, adding that sales have dropped to 3 percent of total sales from 10 percent in 2012. The brand still operates a fleet of 600 stores there.
He attributed slow sales in Japan to “the impact of a non-growing population; an ageing society where the population is declining that has had an impact on the overall spending in the sporting goods market, and slow sales in Korea to the impact of the tourist ban from China which has “significantly impacted” business.
The Herzogenaurach, Germany-based sporting goods firm said net profit in the three-month period ended March 31 totaled 540 million euros, boosted by an 11 percent increase at its Adidas brand and double-digit increases in the running, football and training categories, as well as at Adidas Originals. Sales at Reebok dipped 3 percent due to declines in the training and running categories.
Sales in the period inched up 1.9 percent to 5.59 billion euros. E-commerce remained the fastest-growing channel with an increase of 27 percent.
Gross margin, a key indicator of profitability, grew by 1.5 basis points to 51.1 percent versus 49.6 percent in the equivalent year-ago period, with the positive effects from a better pricing and product mix offsetting significant currency headwinds, Adidas said.
Rorsted said he did not expect any impact from the looming U.S.-China trade war as most of the brand’s sourcing takes place in Vietnam and Indonesia.
Adidas said it expects to see slower growth in Western Europe but reiterated its financial targets for 2018, saying group sales were expected to increase at a rate of around 10 percent on a currency-neutral basis, driven by double-digit growth in North America and Asia-Pacific. Net income from continuing operations is set to rise to between 1.62 billion euros and 1.68 billion euros. Gross margin is set to inch up 0.3 basis points to a level of up to 50.7 percent, versus 50.4 percent in 2017, the company said.
Major events for the company this year will include the FIFA World Cup this summer, as the sponsor of 12 participating teams.