Germany's Adidas posts operating profit of $292.7 mn in FY23

13 Mar '24

3 min read

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Insights

Adidas's saw a downturn in operating profit to €268 million ($292.7 million) in FY23 from the previous year's €669 million, alongside a 5 per cent revenue decrease to €21.427 billion ($23.4 billion).
The brand achieved growth in footwear sales driven by strong performances in football.
The company's direct-to-consumer revenues climbed by 3 per cent.

Germany-based global sportswear brand Adidas has reported an operating profit of €268 million (approximately $292.7 million) in fiscal 2023 (FY23) from €669 million in the previous year, and an operating margin decline to 1.3 per cent from 3 per cent. The sports apparel giant saw revenues decrease by 5 per cent to €21.427 billion (approximately $23.4 billion) due to reduced wholesale channel sell-in aimed at decreasing high inventory levels and the discontinuation of the Yeezy business, which alone accounted for a €500 million drag on year-over-year comparisons.

Despite these challenges, Adidas experienced mid-single-digit growth in footwear sales, driven by strong performance in football and US sports, while apparel revenues dipped by 6 per cent. Accessories sales saw a 3 per cent increase, largely thanks to football. The company's focus on iconic franchises continued to generate excitement across various categories, the company said in a press release.

In terms of distribution, wholesale sales dropped by 4 per cent, but direct-to-consumer revenues rose by 3 per cent, with own retail stores achieving a notable 12 per cent increase due to strong sales in all markets except North America, where the company faced significant impacts from the Yeezy discontinuation and a conservative sell-in approach. Greater China and Latin America displayed robust growth, while North American revenues declined by 16 per cent.

The company's gross margin slightly improved to 47.5 per cent, and inventories decreased significantly by nearly €1.5 billion to €4,525 million, reflecting Adidas's efforts to streamline operations. However, the net loss from continuing operations was €58 million, a stark contrast to the €254 million net income in FY22, attributed to an extraordinarily high tax rate.

For the fourth quarter of FY23, currency-neutral sales were down 2 per cent, including a 5-percentage-point drag from the Argentine Peso devaluation. Nevertheless, the gross margin improved by 5.5 percentage points to 44.6 per cent, due to less discounting, lower freight costs, and a better business mix, though this was partly offset by negative foreign exchange effects and higher product costs, leading to an operating loss of €377 million.

“Although by far not good enough, FY23 ended better than what I had expected at the beginning of the year. Despite losing a lot of Yeezy revenue and a very conservative sell-in strategy, we managed to have flat revenues. We expected to have a substantial negative operating result, but achieved an operating profit of €268 million. With a very disciplined go-to-market and buying process, we reduced our inventories by almost €1.5 billion. With the exception of the US, we now have healthy inventories everywhere,” said Adidas CEO Bjorn Gulden.

Fibre2Fashion News Desk (DP)

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