Adidas' North American Struggles and Global Market Share Risks: Assessing Long-Term Investment Viability Amid Supply Chain Shifts and Post-Yeezy Recovery

Adidas AG, once a dominant force in the global sportswear sector, faces mounting challenges in North America and broader market share risks as it navigates post-Yeezy recovery, supply chain disruptions, and aggressive discounting strategies. While the company reported a 12% currency-neutral sales increase in 2024, its North American performance-marked by a 2% sales decline-highlights regional vulnerabilities that could test its long-term investment appeal. This analysis evaluates Adidas' strategic positioning, competitive dynamics, and operational risks to determine whether its current trajectory supports sustained growth or signals deeper structural issues.

North American Performance: A Mixed Bag of Progress and Setbacks

Adidas' North American segment, a critical battleground for global market share, saw a 2% sales decline in 2024, driven by a conservative approach to wholesale inventory management and the absence of Yeezy revenue according to the company's financial report. Despite this, the region's gross margin improved by 3.0 percentage points to 43.1%, reflecting lower sourcing costs and a better product mix as reported in the financial review. Operating expenses also dropped by 4% to €1,788 million, underscoring cost discipline according to the management report. However, the company's reliance on targeted discounting campaigns to clear overstock in high-stock markets-a strategy that contributed to improved financial performance-raises concerns about margin sustainability as noted by SP Global.

The end of the Yeezy collaboration, which concluded in Q4 2024 with €650 million in revenue according to the income statement, has left a void in Adidas' North American portfolio. While the brand has shifted focus to running, basketball, and lifestyle categories, growth in these areas has lagged behind Europe and Asia, where currency-neutral sales excluding Yeezy rose by 12% as stated in the company's press release. U.S. tariffs and the Red Sea crisis further compounded challenges, causing shipment delays and eroding consumer confidence according to financial analysis.

Global Market Share and Supply Chain Vulnerabilities

Globally, Adidas' 2024 results were bolstered by a 12% currency-neutral sales increase and a €1 billion rise in operating profit as reported in the company's announcement. CEO Bjørn Gulden emphasized the company's resilience in adapting to macroeconomic pressures, including supply chain bottlenecks and geopolitical uncertainties according to the company's statement. Yet, the North American drag-where sales excluding Yeezy grew by only 8%-suggests uneven recovery across regions as noted by financial data.

Supply chain disruptions, particularly from U.S. tariffs on manufacturing hubs in Vietnam and Indonesia, have added operational complexity according to market analysis. The Red Sea crisis exacerbated these issues, leading to shipment delays and increased costs as reported by financial sources. While Adidas has prioritized working capital management and inventory optimization, its ability to maintain gross margins amid these headwinds remains uncertain.

Discounting, Brand Equity, and Competitive Pressures

Adidas' reliance on discounting-a common industry tactic-has sparked debates about its impact on brand equity. In 2024, the company maintained promotional levels in line with prior years, offering up to 60% off select items online according to market analysis. While this strategy helped clear inventory, it contrasts with peers like On Running and Victoria's Secret, which have seen stronger growth by avoiding heavy discounts and preserving premium pricing as noted by industry research.

The sportswear sector's shift toward full-price sales models is evident in Nike's recent strategy, which eliminated 30% extra discounts during Black Friday according to market commentary. Adidas' approach, however, risks diluting its brand value in a market where consumers increasingly prioritize authenticity and premium positioning. This tension is further amplified by Nike's recent 9% sales decline, contrasting with Adidas' 19% Q4 growth in North America as reported by Reuters.

Valuation and Investment Implications

From a valuation perspective, Adidas appears more attractively priced than Nike, with a forward price-to-sales multiple of 1.49 versus Nike's 2.02 according to Nasdaq analysis. This gap reflects investor skepticism toward Nike's repositioning under new CEO Elliott Hill, while Adidas' streamlined product lines and cultural collaborations have reinvigorated its brand as noted by financial analysis. However, Adidas' forward-looking metrics must be weighed against its North American struggles and global supply chain risks.

For long-term investors, Adidas' strategic focus on running, basketball, and lifestyle categories offers growth potential, particularly as it leverages agility and localized marketing as stated in the company's announcement. Yet, the company's reliance on discounting and exposure to U.S. tariffs could undermine margins and brand equity. The post-Yeezy recovery, while partially successful, has not yet translated into sustained North American dominance, leaving Adidas vulnerable to competitive shifts.

Conclusion: A Tenuous Path Forward

Adidas' 2024 results demonstrate resilience in a challenging environment, but its North American performance and global supply chain vulnerabilities highlight structural risks. While the company's cost discipline and product diversification efforts are commendable, its reliance on discounting and exposure to macroeconomic pressures could hinder long-term growth. Investors must weigh these factors against its competitive edge over Nike and favorable valuation metrics. For Adidas to solidify its market share, it must balance inventory management with brand premiumization-a delicate act that will define its investment viability in the years ahead.