Adidas shoes are on display at a DSW store in Novato, California on January 31, 2024.
Justin Sullivan | Getty Images
Adidas warned on Wednesday of a decline in sales in its crowded North American market in 2024 because the German sportswear brand continues to sell its remaining Yeezy inventory.
Currency-neutral sales in North America are expected to say no to mid-single digits in 2024, but are expected to post mid-single-digit growth globally despite ongoing “macroeconomic challenges and geopolitical tensions,” the corporate said.
Adidas confirmed its 2023 operating profit was 268 million euros ($292.9 million) on constant currency sales, well above previous expectations, as the corporate continued to suffer from the discontinuation of its Yeezy product line – the corporate’s footwear business Retailer – to suffer has been produced in collaboration with the American rapper Ye, formerly often known as Kanye West.
For the fourth quarter, the corporate posted an operating lack of 377 million euros. The board proposed a flat-rate dividend of 0.70 euros per share.
“Although not nearly good enough, 2023 ended better than I expected at the start of the year,” CEO Bjørn Gulden said in an announcement.
“Despite the loss of large Yeezy revenues and a very conservative sell-in strategy, we managed to achieve flat sales. We expected a significantly negative operating result, but achieved an operating profit of 268 million euros.”
Adidas confirmed preliminary results released in late January when it announced it could not write off most of its Yeezy inventory and as a substitute sell the remaining shoes at cost.
The sportswear giant was forced to ax the Yeezy line after ending its partnership with Ye over a series of anti-Semitic comments made by the rapper in 2022.
Adidas said the discontinuation of Yeezy represents a year-on-year burden of around 500 million euros through 2023, with the sale of parts of remaining inventory within the second and third quarters having a positive impact on net sales of around 750 million euros.
“Through a very disciplined launch and purchasing process, we have reduced our inventory by almost 1.5 billion euros. “We now have healthy inventories everywhere except the U.S.,” Gulden said.
He added that the corporate expects some growth in the primary quarter of 2024 and further recovery within the second half of the yr.
“We still have a lot of work to do, but I am very confident that we are on the right track. We will bring adidas back again. Give us some time and we will say again: We did it!” he said.
Adidas forecast an operating profit of around 500 million euros for 2024, with unfavorable currency effects expected to “significantly weigh on the company’s profitability” on account of a negative impact on each reported sales and gross margin development.
Adidas shares stagnated until mid-morning on Wednesday.
Mamta Valechha, equity analyst at Quilter Cheviot, said essentially the most interesting aspect of Wednesday’s report was the “significant acceleration of the Adidas brand” on condition that the headlines were published back in January.
“For Adidas and the sportswear industry in general, performance will again be half-weighted, with the first half still impacted by initiatives to clear elevated inventories, particularly in North America,” she said by email.
“Retailers’ order books are therefore still weak in the first half of the year as they are acting quite cautiously. However, demand is expected to pick up due to the Olympics and European Championships this summer.”
Adidas is aiming for a return to sales growth by expanding successful shoe lines corresponding to Samba and Gazelle while introducing recent lines.
