Adidas Continues to Bank on Yeezy, Kanye West After Solid Q4 Earnings

Adidas continues to bank on its relationship with Kanye West.

The long-standing collaboration with the rapper-turned-designer has been hugely rewarding for the Germany-based sportswear giant. Since the Adidas Yeezy Boost was named FN’s Shoe of the Year in 2015, West’s streetwear designs have garnered a cultlike following. The momentum has spilled into the most recent period, with the Yeezy Boost 350 V2 “Triple White” sneaker contributing to a stellar Q4 for the brand’s e-commerce sales.

In an interview with Bloomberg TV, CEO Kasper Rorsted explained, “We have been very, very happy with the relationship we’ve had with Kanye West, and we will continue to be. What we’ve done is introduce more and more pieces of footwear into the market — not only the 350 but the 500 and 700. We’ll continue to do so in 2019 and on, and we believe that the current relationship we have with Kanye is very successful.”

In September, Adidas recorded the largest digital drop of a Yeezy model to date through the Yeezy Boost 350 V2 “Triple White,” which was hailed as a major commercial success by the brand with millions of visits on its website as well as media mentions and search interest that surpassed previous Yeezy releases.

“Right now, we’re just trying to make sure that we keep bringing really hot footwear into the market to drive the brand [and], at the same time, driving volume primarily around the 350 shoe,” the exec added. “While [Yeezy product is] important from the business standpoint, it’s really important from a brand-building standpoint. Kanye is not an American brand; Kanye is a global brand, and Yeezy is a global brand, so we’re looking upon it as a brand driver more than a business driver for us, and that will be the case also for 2019.”

The remarks come on the heels of Adidas’ fourth-quarter earnings report, which saw sales rise 3.5 percent to 5.23 billion euros ($5.91 billion) and profits soar 29 percent to 93 million euros. For the full year, revenues climbed 3.3 percent to 21.91 billion euros, and net income increased 19.5 percent to 1.7 billion euros.

Rival Nike is also riding high off its December earnings announcement, reporting double-digit sales growth and revenues of $9.4 billion that easily beat expectations. (The brand was the third-best-performing Dow stock of 2018.)

Attributing its success to double-digit growth in the North America and China regions and its e-commerce platform, Adidas conversely pointed out challenges in the Reebok business as well as issues with its supply chain in the United States and a slowing European economy.

It also noted slowing sales of its retro footwear styles as consumers continue to patronize newer products, which have a higher gross margin compared with those that have been in the market for more than a single season. (At Adidas, products launched during the course of the year accounted for 74 percent of brand sales.)

“I think the overall mix will stay the same, but the sport business is core to who we are, and we’re seeing a tremendous interest [in] our sports business through the last franchise, whether it’s football, running or American football,” Rorsted said in the Bloomberg interview. “Also, the move to casualwear as a balance will continue; people want to wear cool sneakers when they go to work, and we are seeing that trend.”

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