The German footwear and sports equipment firm Adidas recorded losses of 75 million euros in 2023, in contrast to the attributable net profit of 612 million recorded a year earlier, as a result of the impact on its results of the multinational’s breakup in 2022 with rapper Kanye West and inventory reduction.
In this sense, the three-band multinational has reported that its net sales totaled 21,427 million euros last year, a figure 4.8% lower than that of 2022, after a significant reduction in sales to the wholesale channel. as part of initiatives to reduce high inventory levels.
In addition, Adidas has specified that the interruption of the business of ‘Yeezy’, the brand developed in collaboration with Kanye West, represented a burden of around 500 million euros. Thus, excluding Yeezy’s revenue in both years, the company’s currency-neutral revenue grew 2% in 2023.
By geographical area, Adidas sales in Europe, the Middle East and Africa (EMEA) fell by 3.7%, to 8,235 million euros, while in North America they decreased by 18.5%, to 5,219 million, although they increased by 0 .4% in China, up to 3,190 million, and 0.6% in Asia Pacific, up to 2,254 million. In the case of Latin America, sales totaled 2,291 million, 8.9% more.
In the fourth quarter, Adidas posted a negative result of 379 million euros, thus reducing by 26% the losses of 512 million in the same period of 2022, while net sales decreased by 7.5%, to 4,812 million.
“Although it was not good enough, 2023 ended up better than I expected at the beginning of the year,” said Bjorn Gulden, CEO of Adidas, who highlighted that, “despite losing a lot of revenue from Yeezy and a very conservative”, the company managed to have stable income.
“With a very disciplined purchasing and marketing process, we reduced our inventories by almost 1.5 billion euros. With the exception of the United States, we now have healthy inventories everywhere,” he added.
Looking ahead to 2024, despite persistent macroeconomic challenges and geopolitical tensions, Adidas hopes to return to growth by expanding its successful franchises, introducing new ones and leveraging its product range.
As a result, the company expects currency-neutral sales to grow at a mid-single-digit rate in 2024, assuming it will sell the remaining Yeezy inventory at cost, which would result in sales of around €250 million in 2024. compared to Yeezy’s revenue of around €750 million in 2023.
From a market perspective, Adidas expects that, excluding the impact of Yeezy, its currency-neutral revenue will grow significantly in all markets except North America, where it sees a mid-single-digit decline in 2024.
By contrast, Adidas expects underlying revenue in China and Latin America to grow at a double-digit rate in currency-neutral terms in 2024.
“The company expects sales development to accelerate throughout the year, as growth in the first half will continue to be negatively affected by initiatives to reduce high inventories in the North American market,” indicated the multinational, which is confident that, in the second half of the year, the underlying business “will grow at a double-digit rate.”
Thus, taking into account the expected currency headwinds, Adidas expects to generate an operating profit of around €500 million in 2024, adding that, assuming that the sale of the remaining Yeezy inventory will be carried out at cost, it anticipates that it will not have any effect on the company’s operating profits this year.
