The German sporting goods manufacturer Adidas AG reported on Wednesday a decline in sales and profits in the third quarter of the current 2023 financial year.
The current numbers did not come as a surprise. They corresponded to the preliminary results that the company had already presented in mid-October. Because the losses were lower than feared, Adidas raised its forecasts for the full year at the time.
The sporting goods manufacturer is making progress in reducing inventories
According to the complete figures now presented, group sales in the period from July to September reached almost 6.0 billion euros. This means that it missed the level of the previous year’s quarter by 6.4 percent. However, adjusted for exchange rate changes, revenue grew by one percent.
“The sales performance reflects Adidas’ conservative sell-in strategy to reduce high inventory levels, improved sell-through and a focus on full-price sales in its own sales channels,” the company said in a statement. By selling products from the Yeezy line, which was discontinued last year, the sportswear retailer said it generated revenue of 350 million euros in the past quarter.
Negative currency effects and the weak North American business are weighing on sales development
The group had to accept losses in sales in all market regions, but this was mostly due to negative currency effects. Revenues in the EMEA region, which includes Europe, the Middle East and Africa, fell by 2.7 percent to 2.40 billion euros compared to the same period last year. Adjusted for currency effects, however, they rose by 1.9 percent.
In China, sales fell by 7.1 percent (currency-adjusted +5.7 percent) to 870 million euros, in the other Asia-Pacific markets by 2.1 percent (currency-adjusted +6.8 percent) to 567 million euros and in Latin America by 1.8 percent (currency-adjusted +12.8 percent) to 621 million euros.
Things looked worse in North America, where Adidas suffered a 15.2 percent decline in sales (-8.8 percent adjusted for currency effects) to 1.48 billion euros due to double-digit losses in the wholesale business.
The net profit shrinks by a good quarter
One-off expenses related to the discontinuation of Yeezy impacted earnings. The operating profit shrank by 27.5 percent to 409 million euros compared to the same quarter of the previous year. The net profit attributable to the shareholders amounted to 259 million euros, 25.4 percent below the corresponding previous year’s value. However, the net profit from continuing operations was 270 million euros, more than four times as high as in the same quarter of the previous year, in which it was only 66 million euros.
In the first nine months of the current year, Adidas generated consolidated sales of 16.6 billion euros, which corresponded to a decline of 4.0 percent compared to the corresponding previous year’s level. The net profit attributable to shareholders fell by 72.9 percent to 304 million euros.
CEO Gulden: “My impression is that we are getting better every day”
The board once again confirmed the annual forecasts it raised in October. A currency-adjusted decline in sales “in the low single-digit percentage range” and an operating loss of around 100 million euros are expected. Adjusted for special effects, a positive operating result of around 100 million euros should be achieved.
CEO Bjørn Gulden sees the company overall on the right track despite the current unsatisfactory results: “We of course know that our current performance is not good enough,” he explained in a statement. “But we have said from the start that we need time to get this fantastic brand and company back to where it belongs: at the top, as the world’s best sporting goods brand. My impression is that we are getting better every day.”