Adidas Expects Only Slight Sales Dip in 2023, Thanks to Strong Yeezy Demand
London, Aug 3 (Reuters) – Adidas, the sportswear giant, announced on Thursday that it expects its sales to decline only slightly in 2023, which is a better outcome than previously estimated. The company attributes this positive outlook to the continued strong demand for its Yeezy shoes, despite its recent termination of its partnership with rapper and designer Kanye West, now known as Ye.
Since the beginning of the year, Adidas shares have surged by 40% as investors have shown confidence in CEO Bjorn Gulden’s ability to navigate the company through the upheaval caused by the split with Ye. The rapper’s antisemitic comments were the main reason for the termination of the partnership.
Sales of surplus Yeezy shoes played a significant role in the sportswear giant’s second-quarter performance. The company reported generating around 400 million euros ($437 million) in revenue from these shoes alone. As a result, Adidas revised its projected full-year loss from 700 million euros to 450 million euros.
In an effort to mitigate the impact of Ye’s antisemitic remarks, Adidas announced that it has set aside 110 million euros for donations to charities such as the Foundation to Combat Antisemitism and the Anti-Defamation League.
In terms of sales growth, Adidas reported flat overall sales in the second quarter when compared to the same period in 2022. However, due to currency fluctuations, sales were down 5% in euro terms to 5.3 billion euros. The company’s gross margins increased by 0.6 percentage points to 50.9% in the quarter, thanks to reduced discounting.
Adidas now anticipates that its revenue will decline at a mid-single-digit rate in 2023, a more positive outlook than the previously estimated high-single-digit decline. The continued success of the Yeezy shoe line will be crucial in achieving this sales target.
Cristina Fernandez, Managing Director and Senior Research Analyst at Telsey Advisory Group in New York, remarked that the ability of Adidas to sell the remaining Yeezy stock without significant negative media coverage or consumer backlash is a positive outcome for the company.
Adidas plans to release the second drop of the Yeezy line, and even though it is likely to generate strong demand, it may not be as profitable as the first drop. This is because Adidas has opted to include wholesale partners in the distribution of the shoes, rather than solely selling through its own channels.
JD Sports, a major sports retailer, has already started selling Yeezy products from Adidas’ second release.
Adidas clarified that its 2023 outlook does not account for the revenue generated from the second Yeezy release. According to analysts at Citigroup, future Yeezy drops are expected to generate 1.5 billion euros in revenues and 700 million euros in earnings after taking into account Adidas’ planned charity donations.
Adidas also reported positive sales growth in Greater China, with a 16.4% increase in currency-neutral terms in the second quarter. This indicates that the company’s efforts to revive its brand in the region are yielding results. Earlier this year, CEO Bjorn Gulden stated that Adidas would focus more on sports in China and would sponsor more Chinese athletes. These efforts have included signing 17-year-old Chinese breakdance athlete Liu Qingyi and collaborating with Shanghai-based fashion designer Shuting Qiu for a collection inspired by women’s football.
On the other hand, North America experienced a decline in sales of 16.4% in currency-neutral terms. Adidas attributes this drop to high inventory levels in the region.
Shares of Adidas were down 0.8% by 0750 GMT.
($1 = 0.9150 euros)
Reporting by Helen Reid; Editing by Sonali Paul, Mark Potter, and Jan Harvey
———
About the Author:
Helen Reid is a London-based reporter who covers the European retail sector from a global perspective. She focuses on companies such as Adidas, H&M, Ikea, and Inditex, discussing corporate strategies, consumer trends, and regulatory changes. Her coverage also includes major supermarket groups like Ahold Delhaize, Carrefour, and Casino. Helen has a special interest in sustainability and the role of investors in driving change within companies. She previously reported on the mining industry while based in Johannesburg.
Contact: +447584155200