Adidas, the sportswear giant, has reported its second-quarter financial results for 2023, with currency-neutral revenues remaining flat compared to the prior year. The company's top-line development was impacted by a conservative sell-in strategy aimed at reducing high inventory levels, especially in North America and Greater China. Despite challenges, adidas saw improvement in sell-out trends and a strong improvement in gross margin, which increased by 0.6 percentage points to 50.9% compared to Q1.
The operating profit of €176 million included extraordinary expenses of around €160 million, attributed to one-off costs, donations, and future donation accruals. The company's inventory position improved substantially compared to Q1, up only 1% year-over-year at €5.5 billion.
Adidas CEO, Bjørn Gulden, expressed satisfaction with the quarter's development, stating that the core adidas business performed slightly better than expected. He acknowledged the presence of slow-moving inventory in the market but highlighted improving sell-through trends. He also mentioned the strong growth potential for adidas products in the Terrace area, such as Samba and Gazelle, which will support the overall brand heat and sell-through in the market.
Gulden reiterated the company's focus on using 2023 to clean inventories, work on future products, improve operations, build partnerships, and lay the foundation for a better 2024 and profitable years ahead. The company plans to carefully sell off more of the existing Yeezy inventory, making substantial donations to various organizations and positively impacting the company's cash flow and financial strength.
For the full-year outlook, adidas expects revenues to decline at a mid-single-digit rate due to macroeconomic challenges and ongoing geopolitical tensions. The company's underlying operating profit, excluding one-offs related to Yeezy and the strategic review, is anticipated to be around the break-even level. However, including the impact of the Yeezy drop and one-off costs, adidas now expects to report an operating loss of €450 million in 2023.
Despite uncertainties, adidas remains optimistic, with ongoing initiatives to manage inventory and improve sell-through trends, setting the stage for a more promising future beyond 2023. The company is focused on strategic growth and remains committed to positioning itself for sustained success in the years to come.
