Adidas’ lifestyle revenues were down, even though there was extraordinary demand for its Samba, Gazelle, and Campus franchises, which are at the core of the current Terrace sneaker trend, the company said in a media release.
In Q1 FY23, Adidas saw 1 per cent YoY growth in footwear revenues, but apparel sales declined by 3 per cent.
The discontinuation of the Yeezy line impacted revenues by €400 million, and gross margin decreased to 44.8 per cent due to higher supply chain costs and increased discounting.
The company’s operating profit in Q1 FY23 was €60 million.
In Q1 FY23, Adidas’s consolidated currency-neutral revenues remained flat compared to the previous year. The company’s top-line development was impacted by significantly reduced sell-in to the wholesale channel, particularly in North America and Greater China, as part of its initiatives to reduce high inventory levels. Additionally, the discontinuation of the Yeezy business weighed on the top-line development, representing a drag of around €400 million on the year-over-year comparison, mainly across the North America, Greater China, and Europe, Middle East and Africa (EMEA) regions.
Adidas’s gross margin decreased to 44.8 per cent, down 5.1 percentage points compared to the previous year. This decrease was mainly driven by the increase in supply chain costs and higher discounting in the marketplace.
The company’s direct-to-consumer (DTC) revenues declined by 7 per cent in Q1 FY23 compared to the previous year, reflecting the adverse Yeezy impact on the company’s e-commerce business, as the majority of this product used to be sold through Adidas’s own online channel. However, sales in the company’s own retail stores increased by 11 per cent YoY in Q1.
Currency-neutral sales in North America declined by 20 per cent YoY during Q1 FY23. Meanwhile, sales in EMEA grew by 4 per cent YoY, driven by high-single-digit growth in wholesale. Revenues in Asia-Pacific and Latin America continued to increase at double-digit rates, driven by strong growth in both wholesale and DTC.
Adidas’s operating profit for Q1 FY23 was €60 million, resulting in an operating margin of 1.1 per cent. However, after taxes, the company’s net loss from continuing operations amounted to €24 million, compared to a net income of €310 million in the same period last year. Basic EPS from continuing operations decreased to negative €0.18, compared to a positive €1.60 in the previous year, the release added.
“Q1 ended a little better than we had expected with flattish sales and a small operating profit of €60 million. Sales growth excluding Yeezy was 9 per cent. Great double-digit growth in Latin America and Asia-Pacific, and slight growth in EMEA despite Russia were in line with our plan. Total revenues in Greater China were still down 9 per cent, but we achieved double-digit sell-out growth. This was better than expected and makes us optimistic for the rest of the year. The 20 per cent sales decline in North America—down 5 per cent excluding Yeezy—was in line with our conservative sell-in strategy due to the high levels of inventory and discounts in the market, said Adidas CEO Bjorn Gulden.
Fibre2Fashion News Desk (DP)
