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Adidas now expects a smaller loss than it had forecast for this year.
Scott Olson/Getty Images
Adidas
posted a stronger profit than projected and raised its forecast of sales for this fiscal year, thanks to the Yeezy collection.
The sportswear company (ticker: ADDY) reported an operating profit of €176 million ($192.3 million), more than double the €65.4 million analysts had expected. Sales came in at €5.34 billion, higher than forecasts for €5.27 billion, but still flat compared with the prior year.
Sales of Yeezy sneakers, made in a partnership with the rapper Ye, boosted the top line by nearly €400 million,
Adidas
said (ticker: ADDYY). The bottom line benefited by roughly €150 million.
The sportswear company severed ties with Ye last fall after the entertainer, formerly known as Kanye West, made a series of anti-Semitic social media posts. Adidas said in late May that it would start selling some of its remaining shoes from that partnership.
“The sale of the first part of the Yeezy inventory did of course help both our top and bottom line in the quarter,” said CEO Bjørn Gulden in a press release.
Yeezy demand was so strong that the company adjusted its full-year financial forecasts. It now expects revenue to decline at a mid-single-digit rate in 2023, up from a projected decline in the high single digits. Adidas expects to report an operating loss of €450 million, while it had said it expected a loss of €700 million.
On Wednesday, Adidas launched a second drop of Yeezy inventory, available online. That will also improve the company’s results, but the benefit isn’t reflected in the current outlook for 2023, Adidas said.
Selling off inventory, rather than destroying it, allows the company to make “substantial donations” to organizations combating anti-Semitism, Adidas said on Thursday. “And it is of course also helping both our cash flow and our general financial strength,” Gulden added.
Outside of its Yeezy business, Adidas reported somewhat of a mixed quarter. Footwear revenue grew 1% from a year earlier, while apparel sales declined 3%. Currency-neutral wholesale sales fell by 10%, despite double-digit growth in China and Latin America.
Gross margins improved, rising 0.6 percentage point to 50.9%, driven by price increases. Inventory levels, which have been a stumbling block for Adidas in recent quarters, also improved. The company said inventories were up 6% compared with the prior year.
Shares of Adidas were up 1% to €180.42 in early afternoon trading in Europe. Shares of the company’s U.S. listed shares ticked up 0.8% to $98.68.
Write to Sabrina Escobar at [email protected]
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