Dive Brief:
- Adidas on Tuesday raised its guidance again, thanks to sales of leftover Yeezy merchandise. The athletics retailer now expects an operating loss of 100 million euros ($105.3 million) for the year, down from its last projection of 450 million euros, according to a company press release.
- Adidas reported it now has about 300 million euros left of potential Yeezy inventory write-offs, down from 400 million previously. The company also raised its operating profit outlook, which is now expected to reach around 100 million euros in 2023, instead of breaking even.
- Currency neutral revenues for the year are predicted to decline in the low-single digits, up from a mid-single-digit decline forecast earlier. Adidas also released preliminary Q3 results, with non-currency neutral revenues expected to decline 6% to 6 billion euros.
Dive Insight:
Adidas’ latest projections represent a significant improvement from the start of the year, when the retailer warned of a 700 million euro loss for 2023. The company is still projecting its first annual loss in three decades, but the degree of that loss has tempered with each release of Yeezy inventory.
For Q3, Adidas expects its gross margin to improve by 0.2 percentage points and projects its operating profit will reach 409 million euros, down about 27% from last year.
“While the company’s performance in the quarter was again positively impacted by the sale of parts of its remaining Yeezy inventory, the underlying adidas business also developed better than expected,” the company said in its release.
Adidas said much the same thing when it raised its guidance in July after the first leftover Yeezy inventory drop. Wedbush analyst Tom Nikic said the athletics retailer is performing better than anticipated.
“It's somewhat surprising that Adidas is hanging in as well as they are, considering the challenging athleticwear market and difficult competitive dynamics,” Nikic said in emailed comments. “However, given the strong trend in Adidas retro styles (Samba, Gazelle, Campus), they seem to be mitigating some of these headwinds.”
Unlike the last time Adidas raised its guidance, the retailer did not mention potential future Yeezy drops in its release. Adidas CEO Bjørn Gulden in the past indicated the retailer would continue to sell off its Yeezy inventory, but does not plan to create and sell new Yeezy shoes. The retailer in September said its stance had not changed on cutting ties with Ye, also known as Kanye West, after Gulden’s comments on the celebrity on a podcast came under scrutiny.
Adidas’ problems are larger than Yeezy, and the retailer has struggled to keep up with rival Nike in recent years, particularly in the North American market. Nike made nearly three times more than Adidas in North America in 2022, amounting to a $12 billion difference. As Adidas looks to capitalize on the market, its president of North America is exiting. Rupert Campbell is leaving the retailer at the end of this month after more than a decade with Adidas.
