Global sportswear major Adidas warned of a sales decline in its main market, North American, in 2024, as the German brand continues to sell off its remaining Yeezy inventory.
adidas CEO Bjørn Gulden said, “Although by far not good enough, 2023 ended better than what I had expected at the beginning of the year. Despite losing a lot of Yeezy revenue and a very conservative sell-in strategy, we managed to have flat revenues. We expected to have a substantial negative operating result, but achieved an operating profit of € 268 million. With a very disciplined go-to-market and buying process, we reduced our inventories by almost € 1.5 billion. With the exception of the US, we now have healthy inventories everywhere.”
Gulden added that the product for 2024 is good, the company’s new marketing campaigns for both Originals and in Performance will continue to strengthen the brand: “Our Sportswear business with clear takedown strategies will strengthen the distribution in the commercial channels in both wholesale and DTC.”
In the fourth quarter, revenues in Adidas DTC concept stores were up double digits, and the adidas full-price sell-out on its own e-commerce platforms was up 40 percent.
Direct-to-consumer (DTC) revenues grew 3 percent versus the prior year. This development was driven by strong growth in adidas’ own retail stores (+12 percent) due to strong double-digit growth in all markets except North America.
Growth was particularly strong in the company’s concept stores, reflecting the improving sell-out trends adidas has been experiencing for its current product range. The company’s e-commerce business declined 5 percent due to the Yeezy impact. In addition, adidas focused on reducing discounting activity and improving the overall business mix on its own online platforms. As a result, adidas full-price sales generated through the company’s own e-commerce activities increased at a strong double-digit rate, leading to significant improvements in the full-price share of the underlying adidas e-commerce business.
Revenues in Asia-Pacific grew 7 percent, driven by double-digit growth in the company’s own distribution channels.
Marketing and point-of-sale expenses decreased 8 percent to € 2,528 million (2022: € 2,763 million) as the company limited investments at the point-of-sale when promotional activity in the marketplace was high.
At the same time, the company continued to invest significantly into brand campaigns around major sporting events such as the FIFA Women’s World Cup, the Rugby World Cup, the Asian Games, or the Cricket World Cup. In addition, adidas connected with consumers through a large number of grassroots activities and ran a very successful Originals campaign during the second half of the year.
The company said 2024 will be a great year to showcase its brand with the Olympics, Paralympics, EURO 24, Copa and all the other sports events.
Gulden said, “We should see some growth already in Q1, but I expect growth to be stronger in the second half of the year. We still have a lot of work to do, but I feel very confident we are on the right track. We will bring adidas back again. Give us some time and we will again say – we got this!””
Major developments FY 2023
Currency-neutral sales flat versus prior year; significantly above initial expectations
Top-line development reflects conservative sell-in, focus on full-price business, and lower Yeezy sales
Gross margin up 0.2pp to 47.5 percent, due to better business mix and lower freight costs; largely offset by significant negative FX effects, higher product costs, and higher discounting
Operating profit of € 268 million almost € 1 billion better than initially expected
Inventories improve strongly to € 4.5 billion, down almost € 1.5 billion year-over-year
Executive and Supervisory Boards propose dividend of € 0.70 per share
Major developments Q4 2023
Currency-neutral sales down 2%, including 5pp drag from Argentine Peso devaluation
Gross margin up 5.5pp to 44.6 percent due to less discounting, lower freight costs, and better business mix; partly offset by significant negative FX effects and higher product costs
Operating loss of € 377 million
Outlook for FY 2024
Currency-neutral revenues to increase at a mid-single-digit rate; remaining Yeezy inventory assumed to be sold at cost
Underlying adidas business to grow at a high-single-digit rate
Operating profit of around € 500 million projected, accounting for significant translational and transactional FX headwinds
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