CEO Bjorn Gulden, in the job since the start of 2023, has been leading a strategic transformation at the company bruised by its fallout with rapper West, which left adidas with €1.2bn worth of unsold Yeezy shoes.
The German retailer stated that its financial performance took a hit in the previous year due to the discontinuation of the Yeezy business and a deliberate reduction of prices to wholesalers aimed at reducing excess inventory.
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Adidas announced its intention to liquidate the remaining Yeezy stock for “at least” the cost of producing the goods, as its consumer, retail and trade research showed it was possible.
GlobalData apparel analyst Pippa Stephens believes the German retailer’s decision not to write off its remaining stock will provide a “much-needed” boost this year.
The Yeezy shoes are projected to make €250m in sales in 2024 and are expected to not affect the company’s operating profit this year.
Taking into account the sale of the Yeezy product and better-than-expected Q4 of 2023, Adidas expects to generate an operating profit of around €500m in 2024.
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By GlobalDataStephens explains that Adidas is clearly showing promising signs of enhancing its brand perceptions and fashion credentials as some of its lifestyle products Samba and Gazelle have recently grown in popularity.
She adds: “Adidas should build on this by focusing more on the enhancement of products in its apparel and accessories categories too, to become front of mind among shoppers seeking the latest sportswear and athleisure.”
Adidas also suffered a €1bn currency hit from factors including a devaluation of the Argentine peso in 2023 and said foreign exchange movements will continue to weigh on its finances this year.
Key highlights from Adidas FY results:
- Sales were down 5% to €21.4bn in 2023,
- Operating profit of €268m compared to €669m in 2022.
For 2024, Adidas forecast a return to modest sales growth later this year as it continues its turnaround efforts.
The CEO expects sales to start “flattish but then improve every quarter.”
Gulden banks on the underlying Adidas business (excluding Yeezy) to grow in the high-single-digits for the full year and to be up at least 10% in H2.
He added: “This year is the next building block needed to bring Adidas back to be a company with double-digit growth and a 10% operating margin.”
