Adidas expects a slight decline in sales for 2023, which is better than initially anticipated, according to the sportswear giant. The strong demand for its remaining Yeezy shoes will help narrow the projected full-year loss. The company’s shares have surged by 40 percent since the beginning of the year, as investors have confidence in CEO Bjorn Gulden’s ability to turn the company around following the tumultuous separation from Yeezy designer Ye, formerly known as Kanye West, due to his antisemitic remarks.
During the second quarter, surplus Yeezy shoe sales generated approximately €400 million ($437 million), resulting in a reduction of the predicted loss for the year to €450 million, down from the previously expected €700 million. Adidas also allocated €110 million in the quarter for charitable donations, including contributions to organizations combating antisemitism, as part of their efforts to address the impact of Ye’s public statements.
Overall sales remained flat in currency-neutral terms compared to the same period last year, while in euro terms, they declined by 5 percent to €5.3 billion. However, gross margins improved to 50.9 percent in the quarter due to reduced discounting.
Adidas now foresees currency-neutral revenues to decline at a mid-single-digit rate in 2023, as opposed to the previously estimated high-single-digit rate. The successful sale of Yeezy stock with minimal negative media or consumer backlash is considered a positive outcome for the company, according to Cristina Fernandez, managing director and senior research analyst at Telsey Advisory Group in New York.
The next Yeezy stock sales are expected to generate strong demand but might not be as profitable as the initial release, as Adidas plans to involve wholesale partners instead of solely selling through its own channels. JD Sports has already started selling Yeezy products from Adidas’ second release of Yeezy shoes.
Adidas clarified that its 2023 outlook does not include the second Yeezy release. Citi analysts predict that further Yeezy drops will bring in €1.5 billion in revenues and €700 million in earnings after accounting for Adidas’ planned charity donations.
In Greater China, second-quarter sales saw a 16.4 percent growth in currency-neutral terms, indicating that the brand’s efforts to revitalize its presence in the region are yielding positive results. Gulden had previously stated that Adidas would increase its focus on sports in China and sponsor more Chinese athletes in an effort to strengthen its position in the market.