The full warehouses and the termination of the Yeezy partnership also weighed on the sporting goods manufacturer Adidas at the beginning of the year.
In the continued business there was a loss of 24 million euros in the first quarter, as Adidas announced on Friday in Herzogenaurach. A year ago, the group had made a profit of 310 million euros here. The Management Board confirmed its forecast for the year. How Adidas will deal with the “Yeezy” products from the canceled cooperation with the controversial US rapper Kanye West, which is on heap, remains unclear. The Adidas share gained around six percent shortly after the start of trading. Analysts had expected even worse results.
Gulden: First quarter just above expectations
According to CEO Björn Gulden, the first quarter ended somewhat better than expected. Inventories are still too high, but already 300 million euros lower than at the beginning of the year. As of the reporting date at the end of March, Adidas inventories still amounted to almost 5.7 billion euros.
In Europe and especially the USA, retailers are sitting on high inventories. In the past year, as a result of the supply chain problems, they had ordered a considerable number of additional products in order to be able to meet the high demand at the time. Items are now sitting in storage while consumers are holding back on purchases.
Adidas boss Gulden, who has been in office since the beginning of the year, regards 2023 as a year of transition for the group. He wants to reposition Adidas this year to start building a profitable business in 2024.
Despite the loss, Adidas exceeded analysts’ expectations in the first quarter. Adjusted for currency effects, sales remained at the previous year’s level at almost EUR 5.3 billion. The operating result collapsed by more than 86 percent to 60 million euros. The corresponding operating margin was just 1.1 percent, after reaching 8.2 percent a year earlier. However, analysts had expected a drop in sales and an even smaller operating profit.
Industry expert James Grzinic from the investment house Jefferies praised above all the sales development. This could mean that Adidas will exceed the forecast issued by management for the year as a whole. For 2023, the Management Board expects a currency-adjusted decline in sales in the high single-digit percentage range. Adidas still sees an increased risk of a recession in North America and Europe as well as uncertainties with regard to the recovery in China.
Still unclear what happens to ‘Yeezy’ products
The forecast includes a loss of sales of 1.2 billion euros in the event that Adidas can no longer sell its remaining Yeezy products. The items were created in a partnership with rapper West. Adidas had made a lot of money from this in the past. Last year, the group ended the cooperation, among other things, because of anti-Semitism allegations against the rapper.
In the first quarter, Adidas therefore lost sales of 400 million euros. It is also unclear what will happen to the products. The options range from various sales opportunities, which could also include donating the proceeds to organizations, to the destruction of the goods. (dpa)