In the first quarter of 2023, currency-neutral revenues at Adidas Ag were flat versus the prior-year level. In euro terms, the company’s revenues declined 1 percent to 5.274 billion euros.
The company said in a statement that top-line development was impacted by significantly reduced sell-in to the wholesale channel as part of the company’s initiatives to reduce high inventory levels, particularly in North America and Greater China.
In addition, the discontinuation of the Yeezy business weighed on the top-line development during the quarter, representing a drag of around 400 million euros on the year-over-year comparison, mainly across the North America, Greater China and EMEA regions.
Commenting on the trading update, Adidas CEO Bjørn Gulden said: “Q1 ended a little better than we had expected with flattish sales and a small operating profit of 60 million euros. Sales growth excluding Yeezy was 9 percent. 2023 will be a bumpy year with disappointing numbers, where maximising our short-term financial results is not our goal. It is a transition year to build a strong base for a better 2024 and a good 2025 and beyond.”
Highlights of Q1 results at Adidas
The company’s footwear revenues grew 1 percent during the quarter, reflecting the strong momentum the Adidas brand is enjoying in its performance categories football, running, outdoor and tennis. Apparel sales declined 3 percent impacted by the high inventory levels in the marketplace. Accessories grew 8 percent during the quarter driven by strong growth in football.
Lifestyle revenues were down during the quarter despite demand for the company’s Samba, Gazelle and Campus franchises.
Wholesale revenues grew in EMEA, Asia-Pacific and Latin America From a channel perspective, currency-neutral sales in wholesale grew 3 percent driven by strong growth in EMEA, Asia-Pacific and Latin America. Direct-to-consumer (DTC) revenues declined 7 percent versus the prior year reflecting the adverse Yeezy impact on the company’s e-commerce business, down 23 percent. At the same time, sales in the company’s own retail stores increased 11 percent.
Currency-neutral sales in North America declined 20 percent during the quarter as the region is particularly affected by the discontinuation of the Yeezy business. In addition, significantly reduced sell-in to the wholesale channel as a result of high inventory levels in the market weighed on the top-line development. Total revenues in Greater China declined 9 percent.
Sales in EMEA grew 4 percent, driven by high-single-digit growth in wholesale. Revenues in Asia-Pacific and Latin America both continued to increase at double-digit rates, with Asia-Pacific up 16 percent and Latin America, 49 percent, driven by strong growth in both wholesale and DTC.
Gross margin declined to 44.8 percent, down 5.1 percentage points, while operating profit amounted to 60 million euros in the quarter, reflecting an operating margin of 1.1 percent. Net loss amounted to 24 million euros compared to 2022 net income of 310 million euros, while basic EPS decreased to negative 0.18 euros compared to positive 1.60 euros last year.
Adidas expects expects to report operating loss of 700 million euros in 2023
For the full year 2023, Adidas continues to expect currency-neutral revenues to decline at a high-single-digit rate as macroeconomic challenges and geopolitical tensions persist.
The company added that elevated recession risks in North America and Europe as well as uncertainty around the recovery in Greater China continue to exist. The company’s revenue development will also be impacted by the initiatives to significantly reduce high inventory levels.
In addition, while the company continues to review future options for the utilisation of its Yeezy inventory, the guidance reflects the revenue loss of around 1.2 billion euros from potentially not selling the existing stock.
Accounting for the corresponding negative operating profit impact of around 500 million euros, the company’s underlying operating profit is projected to be around the breakeven level in 2023. The company also expects to report an operating loss of 700 million euros in 2023.
FAQs
Sales in North America — the company's second-biggest market — declined more than 16% in 2023, partly because Adidas slashed sales to wholesalers in order to reduce their high levels of inventory. The company expects its sales in the region to fall again this year, by around 5%.
Did Adidas lose money after dropping Yeezy? ›
Collapse of Adidas' Ye Partnership Contributed to a Net Loss for the Company in 2023. The company gave over $150 million to anti-hate groups from Yeezy sales last year, though North American revenue dropped 16% in part due to "negative Yeezy impact."
Is Adidas warns of falling sales in North America as it continues to sell off Yeezy inventory? ›
Adidas posted its first annual loss in more than three decades on Wednesday, and warned that US sales will drop this year as the German sportswear giant continues selling off its remaining Yeezy inventory. For 2023, Adidas posted a $63.4 million net loss, its first since 1992, MSN earlier reported.
Why is adidas falling? ›
Lower demand and overstocked stores in the U.S. have weighed on sportswear and apparel companies, and Adidas said sales in North America fell by 21% in the fourth quarter and by 16% over the year.
Is adidas going to sell Yeezys in 2024? ›
As announced at the start of 2024, adidas will release the remaining YEEZY inventory, which features products from 2022, in the course of the year. The range available will include some of the most popular designs beginning with the 350 V2 in STEEL GREY.
How much money will Adidas lose without Yeezy? ›
More losses could be ahead as the company forecast a roughly $535 million hit to earnings this year if it decides not to repurpose the remaining Yeezy products it has in stock. The company is predicting a 2023 operating loss of nearly $750 million.
Will Adidas ever sell Yeezys again? ›
Adidas shared its preliminary financial results for 2023 today, where the global sportswear brand confirmed it "plans to sell the remaining Yeezy product at least at cost in 2024." Adidas CEO Bjørn Gulden said that the sale of the remaining Yeezy inventory will occur at cost, and the sales of the sneakers are expected ...
Who owns Yeezy? ›
We all know how the story ended: Adidas broke up with Ye, but per contractual agreement, it owns Yeezy's designs. Adidas cleared out much of its remaining Yeezy inventory last year, but has recently announced it will sell its remaining inventory in 2024, beginning with a Yeezy 500 tactical boot.
What Yeezys are releasing in 2024? ›
The initial confirmed drop will feature the Yeezy Boost 350 V2 in the “Steel Grey” colorway. Furthermore, enthusiasts can anticipate the launch of the Yeezy Foam Runner, Yeezy Slide, Yeezy 500, and another iteration of the Yeezy Boost 350 V2 during this season.
Why did Adidas stock drop in 2024? ›
Adidas projected an operating profit of around 500 million euros in 2024, with unfavorable currency effects expected to “weigh significantly on the company's profitability” because of adverse impacts on both reported revenues and gross margin development. Adidas shares were flat by mid-morning on Wednesday.
adidas CEO Bjørn Gulden: “Although by far not good enough, 2023 ended better than what I had expected at the beginning of the year. Despite losing a lot of Yeezy revenue and a very conservative sell-in strategy, we managed to have flat revenues.
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Total debt on the balance sheet as of December 2023 : $6.15 B. According to Adidas's latest financial reports the company's total debt is $6.15 B. A company's total debt is the sum of all current and non-current debts.
What is the outlook for Adidas in 2024? ›
adidas now expects currency-neutral revenues to increase at a mid- to high-single-digit rate in 2024 (previously: increase at a mid-single-digit rate). The company's operating profit is now expected to reach a level of around € 700 million (previously: to reach a level of around € 500 million).
Why is Adidas still selling Yeezys? ›
The company said a better-than-expected fourth quarter was helped by a decision not to write off most of its Yeezy inventory for $325 million. It will instead sell the remaining products at cost. In December, Ye unveiled the first Yeezy shoe produced since Adidas cut ties.
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Why is everything on Yeezy $20? ›
As fans will note, the $20 price point is one that has been discussed by Ye multiple times in the past. In a since-removed 2022 interview on the Alo Mind Full podcast, for example, Ye blamed Gap for not hitting this exact price point for the ultimately short-lived Yeezy Gap Engineered by Balenciaga collaboration.
How much did Adidas profit from Yeezy? ›
Yeezy generated $2 billion in annual sales for Adidas, making up around 10% of the brand's total revenue. Adidas said the termination was expected to "have a short-term negative impact of up to $250 million", and warned it could lose $1.3 billion in revenue in 2023.
Does Adidas make money off Yeezys? ›
Last year Adidas earned $813 million in revenue from two Yeezy releases, down from $1.3 billion in 2022. In late January, Adidas said it expects operating profit to nearly double to about $542.3 million this year after the company's break-up with Ye and the discontinuation of the Yeezy business.
How much money did Adidas make from Yeezy? ›
Adidas Made More Than $560 Million Off Unsold Yeezy Shoes, Report Says.
What happened to Yeezy after Adidas? ›
We all know how the story ended: Adidas broke up with Ye, but per contractual agreement, it owns Yeezy's designs. Adidas cleared out much of its remaining Yeezy inventory last year, but has recently announced it will sell its remaining inventory in 2024, beginning with a Yeezy 500 tactical boot.
