Adidas expects 2023 will be "a bumpy year with disappointing numbers"

Global sportswear giant Adidas reported flat year-on-year revenues in Q1 despite dropping its Yeezy line. However, the company predicts "2023 will be a bumpy year".

The company’s gross margin was down 5.1pp to 44.8%. Operating profit reached a total of £52 million (€60 million) resulting in an operating margin of 1.1% in the first quarter of 2023. However, the company’s revenues declined by 1% to £4.61 billion  (€5.27 billion) in the first quarter (2022: € 5.302 billion).

The top line was impacted by the reduction of wholesale, which was part of the company’s initiative to reduce high inventory levels. In addition, the discontinuation of the Yeezy business represented a drag of around £349 million (€400 million) year-on-year.

Bjørn Gulden, CEO at Adidas, commented: "Q1 ended a little better than we had expected with flattish sales and a small operating profit of € 60 million. Sales growth excluding Yeezy was 9%... This was better than expected and makes us optimistic for the rest of the year."

In terms of categories, footwear revenues grew 1%, apparel sales declined 3% and accessories grew 8% during the quarter.

However, lifestyle revenues were down despite extraordinary demand for the Samba, Gazelle and Campus franchises. These footwear styles are at the forefront of the current Terrace sneaker trend.

Wholesale grew 3% but direct-to-consumer (DTC) revenues declined 7% year-on-year. This is reflective of Yeezy's downfall impacting the e-commerce business (-23%).  Meanwhile, Adidas’ own retail stores saw sales increase by 11%.

Looking forward, for the full year 2023, Adidas continues to expect currency-neutral revenues to decline at a high-single-digit rate as "macroeconomic challenges and geopolitical tensions persist".

If the company discards the remaining Yeezy stock, it expects to report an operating loss of £612 (€700 million) in 2023.

Gulden added: "2023 will be a bumpy year with disappointing numbers, where maximizing our short-term financial results is not our goal. It is a transition year to build a strong base for a better 2024 and a good 2025 and beyond."