Adidas Ups Full-Year Guidance After Prelim Q2 Results Show Yeezy Sales Bump

Adidas currency-neutral sales were flat for the 2023 second quarter when reporting preliminary results for the period ended June 30. In euro terms, company revenues declined 5 percent to €5.34 billion from €5.60 billion in the year-ago comparable period.

Adidas’ gross margin was up 60 basis points to 50.9 percent of net sales in the quarter, compared to 50.3 percent of sales in Q2 2022. Operating profit reached €176 million, or 3.3 percent of sales, in the second quarter, compared to €392 million, or 7.0 percent, in Q2 last year.

The pre4-announcement for the quarter comes on the heels of multiple reports over the weekend that Adidas had orders worth more than €508 million ($565 million) for 4 million pairs of unsold Yeezy shoes, exceeding the company’s “most optimistic forecast” for the planned liquidation (read SGB Media’s coverage here).

Adidas’ top- and bottom-line development in the quarter was positively impacted by the first sale of some of its Yeezy inventory, as announced at the end of May (read SGB Media’s coverage here). In addition, the underlying Adidas business also developed slightly better than expected.

Consequently, Adidas updated its full-year guidance. The company now expects currency-neutral revenues to decline at a mid-single-digit rate in 2023, compared to its previous guidance of a high-single-digit decline. At the same time, Adidas’ underlying operating profit, excluding any one-offs related to Yeezy and the ongoing strategic review, are still anticipated to be around the break-even level.

Including the positive impact from the first Yeezy drop, the potential write-off of the remaining Yeezy inventory is now €400 million, compared to the previously anticipated €500 million write-down. This adjustment, combined with one-off costs related to the strategic review of up to €200 million (unchanged), Adidas now expects to report an operating loss of €450 million in 2023 compared to the previously guided loss of €700 million.

Potential Yeezy drops would further improve the company’s results if successful.