Adidas AG experienced a 7.6% year-over-year decline in net sales to €4.8 billion during the fourth quarter of fiscal 2023. This decrease aligns with the ongoing clearance of the remaining Yeezy inventory following the termination of their partnership with Ye (formerly Kanye West) in late 2022.
Despite the North American market decline and Q4 sales drop, Adidas maintains a positive global growth outlook, forecasting mid-single-digit growth for the full year 2024. This projection comes amidst ongoing “macroeconomic headwinds and geopolitical uncertainties” impacting the broader market.
2023 Financial Performance Summary:
- Operating profit: €268 million ($292.9 million), exceeding initial expectations.
- Currency-neutral sales: Flat, reflecting the absence of Yeezy revenue.
- Fourth-quarter net loss: €377 million.
- Full-year 2023: Net loss attributable to shareholders of €379 million (down from €512 million in 2022).
CEO Bjørn Gulden acknowledged the impact of the Yeezy partnership termination:
- The discontinuation resulted in a €500 million year-on-year revenue shortfall in 2023.
- The company achieved a “better-than-expected” overall 2023 performance due to implemented cost-containment measures.
Inventory Management:
- Strategic sales of remaining Yeezy stock in Q2 and Q3 provided a temporary sales boost of €750 million.
- Adidas reports a significant reduction in overall inventory levels by nearly €1.5 billion, achieving “healthy inventory levels” outside the United States.
Future Outlook:
- Adidas anticipates growth in Q1 2024 with further acceleration expected in the latter half of the year.
- The company projects a €500 million operating profit for 2024.
- Unfavorable currency fluctuations are predicted to potentially hinder profitability.
CEO Gulden remains confident in the company’s ability to recover:
He acknowledges the need for continued efforts but expresses optimism about Adidas’ long-term prospects.
In conclusion, Adidas is navigating the post-Yeezy era. While facing a sales decline in North America and a Q4 sales drop, the company is focused on achieving global growth, reducing inventory levels, and returning to profitability.
Adidas Short (Sell)
Enter At: 190.78
T.P_1: 186.48
T.P_2: 180.72
T.P_3: 173.80
T.P_4: 168.42
T.P_5: 160.74
S.L: 203.40
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