Why North America Is Giving Footwear Brands Big Headaches Right Now

In a call with analysts this week, Adidas CEO Bjorn Gulden described North America as the company’s “biggest problem.” Business in the region was down 16 percent in the quarter and down 18 percent for the first half of the year.

“America is the most difficult market for us to sell into currently because the market is full,” Gulden said. “It’s a very difficult market where many are struggling.”

The issues he referenced are partly a result of general inventory excesses and conservative orders from wholesale retail partners. At the same time, North America is grappling with a series of broader economic challenges, such as inflation, soaring interest rates and recession concerns. For Adidas, this backdrop is compounded by the recent loss of its Yeezy business, which is expected to cost the company close to 400 million euros this year.

When it comes to North America woes, Adidas is not alone. In the last few weeks, Steve Madden, Skechers, Deckers, Puma and Columbia Sportswear have all lamented the challenges in the U.S. market.

“All of our brands are having some impact from what’s happening in the wholesale channel, particularly in the U.S., as wholesalers are resetting inventories,” said VF Corp. EVP and CFO Matt Puckett in a call with analysts earlier this week. VF’s Vans business was particularly challenged in the quarter, with a 40 percent dip in the Americas wholesale channel.

The tense climate has forced executives to turn their focus back home after months of worrying about growth in China, another crucial region. Throughout the pandemic and its aftermath, footwear brands reeled from factory shutdowns and extended lockdowns in Greater China, which impacted production and consumer activity there.

As brands lap prior quarters of decline in China, they’re now noting growth in this region, while the North America business stalls.

At Columbia Sportswear, China net sales increased over 140 percent in Q2. But the company downgraded its full-year outlook due to a slowdown in the U.S., mainly in wholesale.

“In the U.S., sell-through trends softened, reflecting cautious consumer behavior,” said Columbia CEO and president Tim Boyle in a call with analysts this week. “Additionally, elevated inventory levels, particularly in footwear, have contributed to heavier clearance and promotional activity.”

At Skechers, wholesale revenue decreased 5.9 percent, largely due to a 25 percent dip in the U.S. wholesale market. Skechers also faced tough comparisons to the prior year’s Q2, in which wholesale grew 30 percent. Meanwhile, sales in China grew 19 percent.

Like Skechers, Steve Madden’s sizable wholesale business has also been impacted by recent trends, dropping more than 20 percent in Q2. Crocs Inc.’s North America Q2 revenues increased 12.5 percent to $475 million and wholesale revenues were up 5.5 percent. However, wholesale revenue for its Hey Dude brand declined 8.4 percent. Meanwhile, Crocs’ Q2 revenues increased over 100 percent in China.

At Puma, North America sales declined 17 percent in Q2, in line with similar trends from the prior quarter. Meanwhile, the German sportswear company’s business in Greater China grew 36 percent, lapping a prior year of challenges for the region.

“The U.S. continues to be a challenging market with a lot of softness,” said Puma CEO Arne Freundt said in a call with analysts. “We did see that the overall market was trading less units in the first half than the year before. We also continue to see that the consumer sentiment stays muted.”