The full warehouses and the termination of the Yeezy partnership have also burdened the sporting goods manufacturer Adidas at the beginning of the year. In continuing operations, there was a loss of 24 million euros in the first quarter, as Adidas announced on Friday in Herzogenaurach. A year ago, the group had achieved a profit of 310 million euros here. The Management Board confirmed its full-year guidance. Meanwhile, it remains unclear how Adidas will deal with the "Yeezy" products from the terminated cooperation with the controversial US rapper Kanye West. Adidas shares temporarily gained 8 percent in the course of trading on Friday. Analysts had expected even worse results.
According to CEO Björn Gulden, the first quarter ended slightly better than expected. Inventories are still too high, but already 300 million euros lower than at the beginning of the year. As of the reporting date at the end of March, however, Adidas' inventories still amounted to almost 5.7 billion euros.
In Europe and especially in the USA, dealers are sitting on high inventories. Last year, as a result of the supply chain problems, they had ordered a considerable amount of additional products in order to be able to meet the demand that was still high at the time. The items are now in warehouses while consumers are reluctant to buy.
Adidas CEO Gulden, who has been in office since the beginning of the year, sees 2023 as a transitional year for the group. He wants to reposition Adidas this year in order to be able to start building a profitable business in 2024.
In the first quarter, despite the loss, Adidas beat analysts' expectations. At just under EUR 5.3 billion, currency-adjusted sales were on a par with the previous year. Operating profit slumped by more than 86 percent to 60 million euros. The corresponding operating margin was only 1.1 percent, compared to 8.2 percent a year earlier. However, analysts had expected a decline in sales and an even smaller operating profit.
Further decline in sales expected
Industry expert James Grzinic of the investment house Jefferies praised the sales development above all. This could lead to Adidas exceeding the guidance issued by management for the full year. For 2023, the Management Board expects a currency-adjusted decline in sales in the high single-digit percentage range. Adidas continues to see an increased risk of a recession in North America and Europe as well as uncertainties regarding the recovery in China.
The forecast includes a loss of sales of 1.2 billion euros in the event that Adidas can no longer sell its remaining Yeezy products. The articles were created in a partnership with rapper Kanye West. Adidas had made a lot of money from it in the past. Last year, however, the company ended the cooperation, among other things, because of anti-Semitism allegations against the rapper.
As a result, Adidas lost 400 million euros in sales in the first quarter. Furthermore, it is unclear what happens to the products. The options range from various sales opportunities, which could include donating the proceeds to organizations, to destroying the goods.