Dive Brief:
- After multiple successful sales of its leftover Yeezy product, Adidas on Wednesday said it no longer plans to write off any of the remaining inventory and will instead sell the product “at least at cost” in 2024, per a company press release.
- The announcement came alongside preliminary full-year results, as well as what Wedbush analysts called “a highly disappointing outlook” for 2024. In 2023, preliminary results suggest sales fell 5% to 21 billion euros ($23 billion).
- Notably, CEO Bjørn Gulden said the retailer recorded a 268 million euro operating profit for the year, dodging its first annual loss in three decades. That’s mostly thanks to the company’s decision not to write off its Yeezy inventory, which generated 750 million euros of sales last year.
Dive Insight:
Adidas’ Yeezy saga appears to be almost at an end.
The remainder of the inventory is expected to be sold in 2024, at which point “it appears that they will then have completely cleaved themselves of this once-prosperous sub-brand,” Wedbush analysts led by Tom Nikic said in emailed comments. The retailer has already said it doesn’t plan to make new products with its Yeezy designs, but the sell-through of the current merchandise has done much to improve its profits in 2023.
In March, the company was projecting a 500 million euro write-off of Yeezy merchandise before Gulden announced the retailer’s plan to sell some of the merchandise. The first sale, which took place at the end of May, was so successful that Adidas raised its guidance over the summer and again in the fall after a second Yeezy drop. The failed partnership, which ended in October 2022, brought in 350 million euros during Q3 — and is expected to bring in 250 million euros in 2024.
“Our consumer, retail and trade research has shown that we can sell this remaining inventory in 2024 for at least the cost price,” Gulden said in a statement. “This is why we have only written off inventory that was either damaged or very broken in sizes.”
While Yeezy will still contribute to sales in 2024, it won’t add to profits, according to Gulden. The executive also said Adidas has reduced its inventories “substantially” and improved its relationship with wholesale partners. Sales are expected to be flat for the start of the year, but improve every quarter, according to Gulden, with non-Yeezy Adidas sales set to grow in the high-single-digits.
“We do of course know that our financial performance is not good,” Gulden said. “But we are on the way of making adidas a good company again. As we said from the beginning, we just need the time to solidly build it up again. I feel that the attitude and agility in our teams are back and that we are showing the old adidas DNA again.”
Still, the disappointing financial results prove that “Adi has a lot of heavy lifting left to do,” Wedbush said. The analysts also noted that the “negative surprise” proves global athleticwear brands are still facing major headwinds. Indeed, a recent report found 81% of sporting goods leaders said inflation and inventory levels were a continuing challenge.
