Germany-based global sportswear brand Adidas has reported a challenging first nine months of fiscal 2023 (9M FY23), with flat currency-neutral revenues and a 4 per cent decrease in euro terms, summing up to €16.616 billion, compared to €17.306 billion in the same period last year. Despite maintaining steady currency-neutral revenues, the gross margin experienced a 1.4 percentage point drop to 48.4 per cent.

Operating costs saw a modest increase of 1 per cent, totalling €7.519 billion. As a percentage of sales, other operating expenses also grew by 2.3 percentage points to 45.3 per cent. This led to an operating profit of €646 million, a significant reduction from €1.393 billion last year, with the operating margin now at 3.9 per cent, almost half of the previous year's margin of 8 per cent, the company said in a media release.

Net income from continuing operations stood at €343 million, down from €736 million, resulting in a decreased basic and diluted earnings per share from continuing operations at €1.69, compared to €3.83 in the previous year.

On a brighter note, Adidas reported a strong improvement in inventory management with a year-over-year decrease of 23 per cent to €4.849 billion. On a currency-neutral basis, inventories declined by 19 per cent.

The third quarter of FY23 (Q3 FY23) alone saw a 6 per cent dip in revenue to €5.999 billion. However, excluding Yeezy revenues, the brand managed a 2 per cent currency-neutral revenue increase. Footwear emerged as a strong category with a 6 per cent growth, while apparel sales saw a 6 per cent decline. The accessories category also experienced a 3 per cent fall in sales.

Despite wholesale revenues falling by 2 per cent, direct-to-consumer revenues rose by 5 per cent in Q3 FY23, bolstered by a 10 per cent surge in Adidas’ own retail stores and a 1 per cent increase in e-commerce sales.

Regionally, sales in North America witnessed a 9 per cent drop in Q3 FY23, while sales in Greater China increased by 6 per cent. EMEA saw a 2 per cent rise, Asia-Pacific a 7 per cent increase, and Latin America continued its strong performance with double-digit growth rates.

The third quarter gross margin inched up to 49.3 per cent. Furthermore, operating profit for Q3 reached €409 million, translating to an operating margin of 6.8 per cent. Net income from continuing operations substantially increased to €270 million, and basic EPS from continuing operations rose to €1.40.

“Q3 was another quarter where we saw progress and where the results were better than expected. The heat around our Terrace range and other models like Campus is creating new growth in our lifestyle business again. We have scaled up supply but are far from covering the total current demand. The halo effect of these successful models, together with the new Originals campaign that we launched in September, has increased our brand heat in all parts of the world. We see the interest in our brand and products increasing in all markets and are now experiencing a visibly higher interest from retailers for the sell-in for our fall/winter 2024 range,” said Adidas CEO Bjorn Gulden.

Fibre2Fashion News Desk (DP)

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