Adidas reported third quarter financial results Wednesday morning that showcased the company’s extended efforts to pare inventory levels, which are down 23% from a year ago. Yet, the North America business continues to be a financial drag on the company.
Global revenue fell 6.4% to €5.99 billion—$6.4 billion based on current exchange rates—with North America the worst performer as sales dropped 15%. In the company’s financial release, Adidas CEO Bjørn Gulden, who started his new position in January, said he expects high inventories will continue to impact the U.S. business “for a while.”
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During the earnings call, Gulden pointed to its stable of U.S. athlete endorsers, which include Damian Lillard, James Harden, Aaron Rodgers and Trevor Lawrence, as an opportunity to jumpstart business in the region. He called out Kansas City quarterback and reigning NFL MVP Patrick Mahomes in particular: “We need to utilize him better.” Gulden also pointed to the release of the first signature shoe for Minnesota Timberwolves guard Anthony Edwards as reason for a “more optimistic outlook for our basketball business.”
North American sales were also hampered by lower sales of its Yeezy line. The company continues to shed the $1.3 billion worth of Yeezy inventory it has left after it ended its partnership with Kanye West last year after the rapper, who is now known as Ye, made a series of antisemitic comments. Adidas sold €350 million ($375 million) worth of Yeezy-branded product during the quarter, which generated operating profits of €150 million ($160 million).
At the start of the year, Adidas expected to post an annual loss of €700 million ($749 million), but the company’s sales of leftover Yeezy inventory have improved its financial outlook, and it now expects a loss of €100 million ($107 million). The company, which has €300 million ($321 million) worth of the shoes left, is not planning any more Yeezy drops in 2023 and is evaluating its plans for 2024 for the remaining product. The company has donated profits from Yeezy sales this year to groups that combat antisemitism.
Adidas shares were down slightly in Wednesday trading, but the stock is up 43% from a year ago following a sharp drop that unfolded during the Adidas-Ye divorce. Previously, the Yeezy business generated roughly $2 billion in annual revenue for the company.
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