Adidas shoes are on display at a DSW store on January 31, 2024 in Novato, California.
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Adidas The German sportswear brand warned on Wednesday that sales in its overstocked North American market will decline in 2024 as it continues to sell off remaining Yeezy inventory.
The company said sales in North America are expected to decline to mid-single digits by 2024 in a currency-neutral scenario, but that global sales are expected to decline despite ongoing “macroeconomic challenges and geopolitical tensions.” Achieve mid-single digit growth.
Adidas confirmed its 2023 operating profit of 268 million euros ($292.9 million) on flat currency-neutral sales, well above its previous forecast as the company continues to be hit by retailers discontinuing its Yeezy line of footwear. Produced in collaboration with American rapper Ye (formerly known as Kanye West).
In the fourth quarter, the company had an operating loss of 377 million euros. The Board of Directors proposes a fixed dividend of €0.70 per share.
“Although not good enough so far, 2023 is ending better than I expected at the beginning of the year,” CEO Bjørn Gulden said in a statement.
“Despite Yeezy’s heavy revenue losses and a very conservative sales strategy, we achieved flat revenue. We expected operating results to be significantly negative, but ultimately achieved an operating profit of 268 million euros.”
Adidas confirmed preliminary results released at the end of January, when it announced that it would not write off most of its Yeezy inventory and would instead sell the remaining shoes at cost.
The sportswear giant was forced to ax its Yeezy line after it terminated its partnership with Yeezy due to a series of anti-Semitic comments made by the rapper in 2022.
Adidas said that although the sale of some remaining inventory in the second and third quarters had a positive impact on net sales of approximately 750 million euros, the suspension of Yeezy production caused a year-on-year drag of approximately 500 million euros in 2023.
“Through a very rigorous listing and procurement process, we have reduced inventory by almost 1.5 billion euros. We now have healthy inventory everywhere except the United States,” Goulden said.
He added that the company expects to see some growth in the first quarter of 2024, with further pickup in the second half of the year.
“We still have a lot of work to do, but I’m very confident that we are on the right track. We will bring Adidas back again. Give us some time and we will say again – we did it!” he said.
Adidas expects operating profit in 2024 to be approximately 500 million euros, and the adverse currency impact is expected to “significantly impact the company’s profitability” by adversely affecting both reported revenue and gross margin development.
Adidas shares fell 1.5% in early trading on Wednesday.
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