Why are sports brands overstocked?

Adidas reported its first annual loss in over 30 years Wednesday and expects a down year for sales in North America. Part of the problem is there’s just too much inventory. And it’s not just Adidas — other sporting goods brands are also dealing with overstocked shelves.

Before your favorite sneaker gets to the shelf, it’s already gone on a drawn-out journey through the international supply chain, said Sonia Lapinsky with AlixPartners.

“The cycle to kind of make and buy and ship footwear is usually, it’s quite a bit longer than typical apparel category,” Lapinsky said.

Adidas and other companies have to choose what shoes to make and how many of them way ahead of time, all while trend cycles are speeding up. 

“By the time they’ve got all this product domestically, the consumer trends have shifted, we’ve had some softening in the market, and they’re just stuck with too much stuff and often the wrong stuff,” she said.

And there’s also an Adidas-specific problem afoot, said Shawn Grain Carter with the Fashion Institute of Technology. It has to do with merchandise by Ye, the artist formerly known as Kanye West, and his antisemitic rant. 

“It impacted their gross margins, it impacted their revenue and it impacted their product, their profitability immediately. They still are trying to unload the Yeezy-branded merchandise,” Carter said.

And consumer demand for footwear and other sports apparel just isn’t what it was compared to, say, 2021, David Swartz with Morningstar said. 

“Their spending has shifted towards other things like travel. If you’re spending money on going to Disney World or something, maybe you’re not spending as much money on running shoes,” he said. 

There are some bright spots for Adidas. Some of the brand’s shoes are on trend, like the Sambas, but there’s only so much one shoe can do.

“For a company like Adidas that does over 20 billion euros a year in sales, it needs a lot of different products to be successful,” Swartz said.

He said competition is fierce in this global industry.