Adidas sees revenue rise in Q3 despite increasing economic challenges

Sportswear and footwear giant Adidas has reported revenue growth of 11% in the third quarter, totalling £5.63 billion (€6.408 billion) despite global economic struggles.

Adidas also shared the following results:

• Currency-neutral revenues increased by 4% in Q3
• Gross margin in Q3 declined by 1.0 percentage points to 49.1% due to high supply chain costs
• Operating profit reached £495.96 million (€564 million), reflecting an operating margin of 8.8%
• In the first nine months of 2022, revenues increased by 1% on a currency-neutral basis

The company’s decision to suspend operations in Russia at the end of Q1 reduced revenues by more than £87.95 million (€100 million) during Q3, particularly impacting the company’s direct-to-consumer business.

In addition, revenue growth was the highest in the football and running categories, with both increasing at double-digit rates. For football, the FIFA World Cup 2022 jersey launch helped increased sales.

Revenues in Running were driven by the latest iterations of Adidas’ successful running franchises, including Adizero and Supernova, which both grew more than 50% during the quarter.

Additional limited drops as part of the Gucci and Balenciaga partnerships also continued to spark excitement around the Adidas brand.

On 25 October the brand decided to terminate the Adidas Yeezy partnership. Adidas now expects currency-neutral revenues for the total company to grow at a low-single-digit rate in 2022. The company’s gross margin is now expected to be around 47.0% in 2022. Adidas estimates its operating margin to be around 2.5% in 2022 and net income from continuing operations to reach a level of around £220 million (€ 250 million).

Adidas CFO, Harm Ohlmeyer, commented: “The market environment shifted at the beginning of September as consumer demand in Western markets slowed and traffic trends in Greater China further deteriorated. As a result, we saw a significant inventory buildup across the industry, leading to higher promotional activity during the remainder of the year which will increasingly weigh on our earnings.

“We are encouraged by the enthusiasm for the upcoming FIFA World Cup which is already noticeable in our Football revenue growth. And in North America we are gearing up for an exciting upcoming basketball launch.”