Adidas had already prepared the market for a disappointing year and the company’s first-quarter results for 2023 were in line with that clouded outlook, even as the brand managed to beat market expectations.
Revenues at the sporting goods company fell 1 percent to 5.27 billion euros. Market analysts had expected the company’s revenues to fall by 4 percent.
“Q1 ended a little better than we had expected,” Adidas’ new CEO Bjorn Gulden said in a statement; Gulden previously headed rival sportswear brand Puma but started at Adidas last January.
The ongoing difficulties with unsold Yeezy stock, the result of a now-defunct collaboration with musician known as Ye – formerly Kanye West – continued to weigh heavily on the company, he noted.
The collaboration ended last October after Ye’s increasingly erratic behavior and offensive comments. But the question of what to do with unsold Yeezy stock remains. Adidas has said that it could lose around 1.2 billion euros if it decides not to sell the product, and Gulden pointed out that Adidas’ Q1 sales growth would have been 9 percent if not for the Yeezy problem.
“We still have a long way to go, but I am very happy with the progress we have made and what we have achieved so far,” Gulden stated, emphasizing that 2023 would be a “bumpy” transitional year.
Sales of footwear grew 1 percent to 3 billion euros, driven by success in performance footwear, particularly in running, football, tennis and outdoor pursuits like hiking. Sales of accessories rose 8 percent 340 million euros and this too was driven by the football category, the company noted.
Apparel sales fell by 3 percent to 1.9 billion euros. “This product division is particularly impacted by the high inventory levels in the marketplace,” Adidas said.
Revenues in North American market decreased 19.6 percent, but rose 48.7 percent in Latin America.
In his statement, Gulden pointed out that the sales decline in North America would only have been 5 percent if the Yeezy line was excluded and that the decrease “was in line with our conservative sell-in strategy due to the high levels of inventory and discounts in the market.”
The situation in mainland China – once one of Adidas’ greatest hopes for growing its business – fell 9.4 percent. Over the whole of last year, Chinese revenues fell 36 percent due to pandemic-related lockdowns and a boycott of Western-made consumer goods. So “this [Q1 in China] was better than expected and makes us optimistic for the rest of the year,” Gulden said in his statement.
In the rest of Asia-Pacific, revenues rose 15.6 percent.
Revenues in Europe, the Middle East and Africa rose 4 percent.
Adidas confirmed its guidance for the year. The German brand expects that it will break even, although revenues will continue to fall at a high single-digit rate throughout 2023.
Adidas explained that various factors will continue to weigh heavily on its performance this year, including geopolitical uncertainties, economic headwinds and uncertain consumer sentiment to the still-uncertain and ongoing recovery in China as well as the question of what to do with unsold Yeezy stock.
This story was reported by WWD and originally appeared on WWD.com.