Adidas raises 2023 sales forecast due to Yeezy destocking.
Adidas raises 2023 sales forecast due to Yeezy destocking.
Adidas Sales to Fall Slightly in 2023, But Yeezy Shoes Help Narrow Losses
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A Turnaround for Adidas, Thanks to Yeezy Shoes and CEO Bjorn Gulden
In a surprising turn of events, sportswear giant Adidas has announced that its sales in 2023 are now projected to only slightly decline, a much better outcome than previously expected. The revised guidance comes as a result of the continued strong demand for its remaining stocks of Yeezy shoes, which have helped to narrow the projected full-year loss.
Since the beginning of this year, Adidas shares have jumped 40%, reflecting investors’ confidence in CEO Bjorn Gulden’s ability to turn the company around after a tumultuous split with Yeezy designer Ye, the rapper formerly known as Kanye West, due to his antisemitic comments. The positive response from investors indicates a growing belief in Gulden’s leadership and the brand’s future prospects.
Surplus Yeezy Shoes Generate Significant Revenue
Sales of surplus Yeezy shoes played a crucial role in Adidas’ improved financial outlook. In the second quarter alone, these sales generated approximately 400 million euros ($437 million), significantly contributing to the reduction of Adidas’ predicted loss for the year to 450 million euros, down from the previously forecasted 700 million euro loss.
While overall sales remained flat in currency-neutral terms compared to the second quarter of 2022, they experienced a 5% decline in euro terms, reaching 5.3 billion euros. Adidas now expects currency-neutral revenues to decline at a mid-single-digit rate in 2023, a more positive forecast compared to the previous estimate of a high-single-digit decline.
Gross Margins Improve, Thanks to Restrained Discounting
Adidas also saw improvements in its gross margins, which increased by 0.6 percentage points to 50.9% in the quarter. This positive development is attributed to the brand’s reduced discounting, suggesting better pricing strategies and increased consumer appeal.
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Cristina Fernandez, Managing Director and Senior Research Analyst at Telsey Advisory Group in New York, praised Adidas for successfully selling the Yeezy inventory without significant negative media or consumer backlash. She stated, “For Adidas to sell the Yeezy stock well, without a lot of negative media or consumer backlash, is a good outcome.” Fernandez also noted that the upcoming sales of Yeezy products are likely to attract strong demand. However, they may not be as profitable as the first drop, as Adidas is now including wholesale partners in addition to selling through its own channels.
Greater China Shows Promise, North America Struggles
Adidas reported a noteworthy growth of 16.4% in currency-neutral terms in Greater China during the second quarter. This positive development signifies that the brand’s efforts to revitalize its presence in the Chinese market are starting to yield results. In March, CEO Bjorn Gulden announced a renewed focus on sports in China, as well as plans to sponsor more Chinese athletes.
Adidas has taken steps towards this goal, such as signing 17-year-old Chinese breakdance athlete Liu Qingyi in June. Additionally, the brand recently announced a collaboration with Shanghai-based fashion designer Shuting Qiu to create a collection inspired by women’s football.
On the other hand, North America has been a struggling market for Adidas, with sales dropping 16.4% in currency-neutral terms. The brand attributes this decline to high inventory levels in the region.
Conclusion
Adidas’ revised sales guidance for 2023, which indicates a minimal decline, is a positive sign for the sportswear giant. The continued demand for Yeezy shoes and improvements in gross margins demonstrate the brand’s resilience and ability to adapt to changing market conditions.
Adidas’ success in Greater China highlights the positive outcomes of its strategy to strengthen its presence in the region. Conversely, the challenges faced in North America emphasize the need for inventory management and strategic adjustments to reignite growth.
As Adidas continues its journey of recovery, it remains to be seen how CEO Bjorn Gulden’s leadership and the brand’s focus on innovation and partnerships will play out in the highly competitive sportswear market. Nonetheless, the positive trajectory signals a potential turnaround for Adidas, setting the stage for renewed growth and success in the future.
($1 = 0.9150 euros)
