Adidas Sees Positive Impact from Sale of Yeezy Inventory

by Warren Seah

Shares in Adidas experienced a boost as the company reported that the sale of its remaining Yeezy-branded inventory had a positive impact on its financial performance in the second quarter. This led to an upgrade in the company’s full-year guidance.

At 0741 GMT, shares in the German sportswear giant were up 3.9% at EUR181.66.

Adidas expects a 5% decrease in revenue for the quarter, amounting to 5.34 billion euros ($5.91 billion). Preliminary figures released late Monday indicate that operating profit is forecasted to fall to EUR176 million from EUR392 million in the same period last year.

Initially forecasted to be EUR500 million, the potential write-off of the remaining Yeezy inventory is now expected to be EUR400 million. This change comes after Adidas ended its partnership with musician and designer Kanye West, also known as Ye. Consequently, the company expects a narrower operating loss of EUR450 million in 2023, compared to the initially anticipated EUR700 million.

The company projects a mid-single percentage digit decline in sales for the full year at constant currency, a more conservative forecast compared to the previous expectation of a high-single-digit fall.

Analysts at Jefferies commented in a research note that Adidas’s upgraded full-year guidance appears to be conservative and likely incorporates the risk of a weaker economy in the second half of the year.

“It seems increasingly clear that 2023 will remain a year of transition, with the underlying profit rebuild starting in earnest 2024,” stated the analysts.

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