Adidas’ shares rose 8% after it posted first-quarter earnings that were above forecasts and indicated the Chinese market was recovering, but its CEO warned the company still faced a “bumpy year with disappointing numbers.”
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After terminating its Yeezy association with musician Kanye West, who changed his name to Ye in 2021, the German sportswear giant is predicting a loss this year.
According to Adidas, the loss of the extremely lucrative Yeezy line reduced sales in the quarter by about 400 million euros ($441 million), primarily impacting revenue in North America, Greater China, Europe, the Middle East, and Africa.
Deutsche Bank analysts found it disappointing that didas did not provide an update on its intentions for its inventory of unsold Yeezy shoes, despite the fact that the company’s quarterly earnings showed encouraging early indications of recovery.
According to CEO Bjorn Gulden, Adidas has reduced the possibilities for the shoes and is nearing a decision.
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Operating profit for the third quarter of 60 million euros ($66 million) exceeded the 15 million euro estimate of analysts. Additionally, despite a 1% decline in sales, this was better than the forecasted 4% decline, which led to an 8% increase in Adidas shares to their highest level since August.
Adidas maintained their 2023 projection despite having previously warned that writing down all of the Yeezy stock would result in an operational loss of 700 million euros ($772 million).
With currency-neutral sales down 20% from the previous year, North America suffered the most from the loss of Yeezy. Gulden claimed that collaborations with Pharrell Williams, Bad Bunny, and Jerry Lorenzo’s Fear of God brand had helped Adidas better engage with US rap culture.
China Has More Accurate Signs
Sales in Greater China, a challenging territory for Adidas, decreased by 9%, although Gulden claimed that the market was showing indications of improvement.
In Adidas’ own stores and wholesalers in China, the sell-through rate, or the percentage of items kept in inventory that went on to be sold, increased by 12% in the first quarter, indicating that retailers will likely order more in the future.
For the first time in the previous two and a half years, according to Gulden, who switched from local sportswear rival Puma to Adidas at the beginning of the year, we are actually optimistic that the statistics will shift from red to green.
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With sales up 49%, Latin America was a shining region. According to Gulden, Adidas has started producing more Samba, Gazelle, and Campus shoes. The “terrace” shoe style is performing well in all markets.
Source: Cosmo Politian