Yeezy destocking helps lift Adidas sales outlook
ADIDAS sales should fall only slightly in 2023, a better outcome than previously expected, the sportswear giant said on Thursday (Aug 3), confirming strong demand for its remaining Yeezy shoes would help narrow a projected full-year loss.
Adidas shares have gained 40 per cent since the start of the year, as investors bet on chief executive officer Bjorn Gulden’s ability to turn the company around after a chaotic break-up with Yeezy designer Ye – the rapper previously known as Kanye West – over his anti-Semitic comments.
Sales of surplus Yeezy shoes generated around 400 million euros (S$587 million) in the second quarter, helping Adidas to reduce its predicted loss for the year to 450 million euros, down from the 700 million euro loss previously expected.
The company set aside 110 million euros in the quarter for donations to charities including the Foundation to Combat Antisemitism and the Anti-Defamation League, a step it had previously announced in a bid to mitigate the impact of Ye’s public anti-Semitism.
In currency-neutral terms, overall sales were flat in the same period versus the second quarter of 2022, while they were down 5 per cent in euro terms to 5.3 billion euros. Gross margins increased by 0.6 percentage points to 50.9 per cent in the quarter, thanks to less discounting.
Adidas said it now expects currency-neutral revenues to decline at a mid-single-digit rate in 2023, from the high-single-digit rate previously estimated.
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“For Adidas to sell the Yeezy stock well, without a lot of negative media or consumer backlash, is a good outcome,” said Cristina Fernandez, managing director and senior research analyst at Telsey Advisory Group in New York.
The next Yeezy stock sales are also likely to attract strong demand, but may not be as profitable as the first drop, Fernandez said, as Adidas is including wholesale partners rather than only selling through its own channels.
JD Sports said it had started selling Yeezy products from Adidas’ second release of Yeezy shoes on Wednesday.
Adidas said its 2023 outlook does not include the second Yeezy release. Citigroup analysts expect further Yeezy drops to generate 1.5 billion euros in revenue and 700 million euros in earnings after Adidas’ planned charity donations.
In Greater China, second-quarter sales grew by 16.4 per cent in currency-neutral terms, an indication that efforts to reboot its brand there are starting to bear fruit.
Gulden said in March Adidas would increase its focus on sports in China and sponsor more Chinese athletes.
In June it signed 17-year-old Chinese breakdance athlete Liu Qingyi, and in July announced a collaboration with Shanghai-based fashion designer Shuting Qiu for a collection inspired by women’s football.
North America was the laggard, with sales dropping 16.4 per cent in currency-neutral terms, which Adidas put down to high inventory levels there. REUTERS
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