Adidas’s Bjørn Gulden has admitted that the financial performance of the group in 2023 was ‘unsightly’, with the sportswear juggernaut reeling from its dispute with Kanye West.
He declared his intention to restore Adidas to its former glory on Thursday, following the retailer’s 2024 sales and profit projections falling short of market expectations.
Additionally, the organization stated that it intended to sell any remaining Yeezy trainers from its dissolved collaboration with Kanye West for at least the cost of production.
The revised outlook for Adidas still incorporates a possible write-off of its residual Yeezy products, estimated by the company to be worth approximately €300 million.
Gulden stated, “Our retail, consumer, and trade research indicates that we will be able to sell the remaining inventory for at least the cost in 2024.” For this reason, we have solely incurred write-offs on inventory that exhibited signs of damage or severe size defects.
The negative projections of the German retailer echo those of Nike, Puma, and JD Sports, all of which have issued similar warnings regarding diminished profits this year due to consumers reducing their expenditures on discretionary goods.
Unfavorable currency fluctuations cost the business approximately €1 billion. The devaluation of the Argentine Peso at the conclusion of the previous year impacted the group. Adidas anticipates that this year’s devaluation will once more have an impact on its bottom line.
Currency-neutral annual revenues for the retailer were unchanged, while operating profit reached €268 million, an increase of €368 million over projections.
In 2023, the gross margin of the group increased by 0.2 percentage points, from 47.3 percent in 2022 to 47.5 percent.
Gulden stated, “We are fully cognizant of the fact that our financial performance is subpar.” However, we are in the process of restoring Adidas to its former glory.
“As we’ve stated from the start, all we need is more time to rebuild it solidly.” I have the impression that our teams have regained their zeal and agility, and that we are once again demonstrating the Adidas DNA.
We anticipate that sales for 2024 will begin relatively stable, then increase quarterly thereafter. It is anticipated that the fundamental Adidas enterprise, excluding Yeezy, will experience double-digit growth for the entire year and a minimum increase of 10 percent in the second half.
Gulden desires that the organization achieve double-digit development and an operating margin of 10 percent once more.
On Thursday, Adidas shares declined by more than 2.5% to EUR 171.48, after having gained approximately 16% over the previous year.
Due to a more challenging economic climate and weaker demand, German sportswear company Puma predicted sales and profits for this year below analyst expectations last week, causing its shares to fall more than 8 percent to their lowest level since 2018.