Herzogenaurach, Germany – Second quarter sales at Adidas fell by 5%, from €5.6bn in the quarter last year to €5.3bn in the 2023 quarter. However, the company said that, on a currency-neutral basis, revenues were flat versus the previous year.
Gross profit was down 3%, from €2.8m last year to €2.7m this. The operating profit of €176m includes extraordinary expenses of about €160m. Footwear revenues grew by 1%.
Efforts to reduce high inventory levels meant that currency-neutral wholesale sales fell by 10%, despite double-digit growth in greater China and Latin America. Direct-to-consumer revenues were up by 16%, driven by growth in both e-commerce and its own retail stores.
In late July, the company revised its full-year guidance. Revenues are expected to decline at a mid-single-digit rate on a currency-neutral basis, amid macroeconomic challenges, geopolitical tensions, and the company’s initiatives to reduce inventory levels. Underlying operating profit is expected to be at about the break-even level, it said.
“We are happy with the way the second quarter developed,” said CEO Bjørn Gulden. “The core Adidas business was slightly better than we expected. Although we still have too much slow-moving inventory in the market, sell-through has been improving. We also saw gross margin in our core business improving strongly compared to the first quarter.”
He added that the market remains very volatile, with a lot of uncertainty for the rest of the year. “As there is still a lot of inventory in the market, retailers are very cautious in their pre-orders,” he said.
In May, the company started to sell off the Yeezy inventory that remains after the termination of the partnership with Kanye West after he made antisemitic comments. “This is much better than destroying and writing off the inventory and allows us to make substantial donations to organisations like the Anti-Defamation League, the Philonise and Keeta Floyd Institute for Social Change, and Robert Kraft’s Foundation to Combat Antisemitism,” Gulden said.
According to a report by Associated Press, Adidas has sold $437m (€397m) of Yeezy inventory since parting ways with West. The company has reportedly made donations of €10m to the charitable organisations, and is expected to donate a further €100m. Adidas chief financial officer Harm Ohlmeyer told Associated Press that further donations may be possible, depending on future sales.
