Adidas on Wednesday reported sales and operating profits for 2023 that beat its guidance, in part due to its resumption of Yeezy sales throughout last year.
The German company revealed preliminary results for 2023, which included a 5 percent sales decline to 21.4 billion euros in reported terms. Currency-neutral revenues were flat, ahead of Adidas’ guidance expecting a low-single-digit decline. Revenues were impacted by unfavorable currency effects including the devaluation of the Argentine peso as well as reduced wholesale sales and the halt of the Yeezy business, which cost the company 500 million euros for the year.
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Gross margin was up 0.2 percentage points to 47.5 percent in 2023. Adidas said its decision to continue selling Yeezy merchandise helped it achieve an operating profit of 268 million euros in 2023, ahead of its guidance for an operating loss of 100 million euros. Adidas said challenging currency effects will continue to weigh on margins in 2024.
Adidas last year began selling some Yeezy inventory via two major drops. The company donated a portion of proceeds to organizations representing people who “were hurt” by Kanye West’s antisemitic comments, which had spurred Adidas’ split from the founder and brand in the first place. These two Yeezy drops lifted net sales by 750 million euros in 2023, compared to more than 1.2 billion in Yeezy revenues in 2022. Overall, Yeezy profits represented about 300 million euros in 2023.
“Our consumer, retail and trade research has shown that we can sell this remaining inventory in 2024 for at least the cost price,” Adidas chief executive officer Bjørn Gulden said. “This is why we have only written off inventory that was either damaged or very broken in sizes.”
Adidas’ full-year 2024 guidance assumes that the company will continue to sell its remaining Yeezy inventory at cost. This decision is expected to result in about 250 million euros worth of sales in 2024, but will have no impact on operating profit.
Overall, Adidas said it expects mid-single-digit growth in currency-neutral sales in 2024, including a high-single-digit growth in currency-neutral sales in the underlying Adidas business. Sales are expected to start off flat in Q1 and then grow in subsequent quarters. Excluding Yeezy, Adidas’ business is projected to be up 10 percent in the second half of 2024. Adidas expects operating profits of 500 million euros in 2024.
Gulden described 2024 as a “building block” to bringing Adidas back to double-digit growth.
“We do of course know that our financial performance is not good,” the CEO 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.”
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