Adidas ups marketing spend by 15% amid ‘brand momentum’ revival
After committing to “over invest” in marketing last quarter, Adidas has kept to its word with increased activity fuelling a quicker than expected turnaround.
By Molly Innes
Adidas is on track to become “a good and healthy company” again, according to CEO Bjørn Gulden.
The sportswear giant upped its marketing spend by 15% to €707m (£596m) in the second quarter ending 30 June, in part due to investment behind its recent brand campaign ‘You Got This’ coinciding with this summer’s Men’s Euros and Copa América tournaments.
“The Euro and the Copa were great football events with great atmospheres and with huge interest from the fans,” said Gulden.
Adidas pledges to ‘over-invest’ in marketing as CEO admits ‘we are not as good as we should be’
As a percentage of sales, marketing and point-of-sale expenses rose 0.6 percentage points to 12.1%. The brand’s operating profit almost doubled in the quarter to €346m (£291m), compared with €176m (£148m) during the same period last year.
It’s been a bumpy year so far for Adidas, which continues to deal with the fallout from cutting ties with Kanye West. Sales of remaining inventory from the rapper’s Yeezy line generated revenue of €200m (£169m) in the second quarter, “significantly below” sales of €400m (£337m) during the same period in 2023.
Adidas is also facing a backlash over its decision to feature – and subsequently drop – model Bella Hadid as the face of its new trainer campaign over her solidarity with Palestine and what the brand describes as “unintentional” connections to the 1972 Munich Olympics.
Despite this, the Adidas CEO said consumers are “reacting positively” to the brand’s marketing and product launches.
Earlier this year, Gulden spoke about the pitfalls of promotional activity, telling investors: “I can swear to you that you shouldn’t be worried that we will do anything to get growth that will take brand equity away.”
In its statement today (31 July), the business said promotional activity in the sector had “normalised”, helped in part by consumer resilience and recent sports tournaments.
Brand momentum
According to Gulden, improvements to brand momentum have happened faster than Adidas expected. However, he acknowledges the job isn’t done yet.
“That does not mean we do not have a lot of work to do. I am convinced we can bring Adidas back to be a very strong and healthy company. To achieve this we will work hard to continue to grow double digits and use this growth to get leverage on our cost base to improve our profitability,” he added.
Footwear was a strong performer in the quarter, with revenues increasing 17%. Apparel sales grew by a lesser 6%, attributed to increased demand for the football offering, while accessories sales declined 8%.
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Adidas’s wholesale business grew by 17% in the quarter, with direct-to-consumer (DTC) revenues up 4%. Splitting out its Yeezy sales, the company’s DTC arm grew 21% in the quarter. Ecommerce sales declined by 6%, again attributed to a “significantly smaller” Yeezy business.
The second quarter far outperformed Adidas’s lacklustre first three months of 2024.
This means that for the first half of 2024, revenues increased 6% to €11.28bn (£9.5bn). When taken on a currency-netural basis, revenues increased 10%. Operating profit for the half was €682m (£575m), a jump from €236m (£199m) in 2023.
Gulden is optimistic about Adidas’s ability to continue to perform.
“We see improved sentiment for the Adidas brand globally and we continue to see improved sell-out numbers, both for lifestyle and performance products,” he said.
