Sharp Inventory Reduction Pushes Adidas Revenue; Gets €350M Boost From Yeezy Sales

Adidas AG ADDYY reported a 1% increase in currency-neutral revenues for the third quarter of FY23 to € 5.999 billion, driven by growth in all regions except North America. In euro terms, the company's revenues declined 6%.

The second product drop of Yeezy inventory generated revenues of around € 350 million in Q3, somewhat below the Yeezy sales generated in the prior year's quarter. As a result, excluding the Yeezy revenues in both years, currency-neutral revenues increased 2% during the quarter.

The revenue reflects the company's conservative sell-in approach aimed at reducing high inventory levels, improved sell-through and focus on full-price sales across own channels.

Footwear revenues grew 6% on a currency-neutral basis, reflecting double-digit growth in Adidas Originals as well as in the football and basketball categories. Apparel sales declined 6%, and Accessories revenues were down 3%.

The company's currency-neutral sales in wholesale declined 2% despite double-digit growth in Greater China and Latin America. At the same time, direct-to-consumer (DTC) revenues grew 5% versus the prior year. 

Currency-neutral sales in North America declined 9%. Revenues in Greater China grew 6%, EMEA increased 2%, Asia-Pacific climbed 7%, and Latin America jumped 13%.

Gross margin expanded by 20 basis points to 49.3% versus 49.1% last year, mainly driven by reduced freight costs.

The company's operating profit amounted to € 409 million with an operating margin of 6.8% versus 8.8% a year ago.

Basic EPS from continuing operations for Q3 was € 1.40 compared to € 0.34 last year.

Inventories are now down 23% to € 4.849 billion versus € 6.315 billion last year.

Also Read: Adidas Banks On Retro Sambas To Fill $2B Void After Yeezy's Partnership With Ye Falls Apart

Outlook: For FY23, Adidas expects currency-neutral revenues to decline at a low-single-digit rate in 2023 (previously: decline at a mid-single-digit rate). 

The company said elevated recession risks in North America and Europe as well as uncertainty around the recovery in Greater China continue to exist.

Adidas now expects a reported operating loss of around €100 million in 2023 (previously: loss of € 450 million).

Adidas CEO Bjørn Gulden, said, "We see the interest in our brand and products increasing in all markets and are now experiencing a visibly higher interest from retailers for the sell-in for our Fall/Winter 2024 range."

Price Action: ADDYY shares closed higher by 0.22% at $92.39 on Tuesday.

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