Adidas’ Yearly Outlook Boosted by $440M of Yeezy Sales
Adidas revealed that it sold around €400 million ($438 million) worth of Yeezy inventory from its product drop in June, as the German sportswear giant deals with the fallout from the costly split with the brand’s designer Ye, the rapper previously known as Kanye West, over his antisemitic remarks.
Adidas has no plans to create more Yeezy product, but it had $1.3 billion worth of existing shoes to unload and decided to donate part of the profits to charity. “This is much better than destroying and writing off the inventory and allows us to make substantial donations to organizations like the Anti-Defamation League, the Philonise & Keeta Floyd Institute for Social Change and Robert Kraft’s Foundation to Combat Antisemitism,” Bjørn Gulden, Adidas CEO, said in the company’s second quarter earnings release. “And it is of course also helping both our cash flow and general financial strength.”
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Yeezy sales were on par to the prior year’s quarter but were 50% lower overall during the first six months of 2023, as the company did not sell any Yeezy products during the first quarter.
The Yeezy sales boost helped Adidas post a better-than-expected operating profit of €176 million ($193 million) in the second quarter, and Adidas said it now expects a full-year operating loss of €450 million instead of €700 million. It projects full-year revenue to decline by a “mid-single-digit rate.”
Adidas reported total second quarter revenue of €5.34 billion ($5.85 billion), which was down 5% from the prior year, although flat on a currency-neutral basis. North American revenue fell 16% on a currency-neutral basis, while China sales jumped 16%. Gulden said the market is still very volatile and that retailers are cautious in their pre-orders due to a lot of inventory in the market.
“We are using 2023 to clean inventories, work on future products, improve the way we work, build better partnerships and lay the foundation for a better 2024 and a good and profitable Adidas in 2025 and 2026,” Gulden said. “2023 is not about trying to show short-term results.”
On Wednesday, the company launched a second drop of Yeezy inventory that will be available throughout the month via its own digital platforms and at select retailers. These sales are not accounted for in the company’s current 2023 top- and bottom-line outlook.
This week, Adidas locked up one of its most important partners in global soccer via a 10-year extension to continue as the kit manufacturer for Manchester United through June 2035. The deal is worth a minimum of £900 million ($1.16 billion) over 10 years.
Adidas’ stock is up 40% year-to-date as investors bet on a continued turnaround.
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