Adidas AG ADDDF ADDYY reported a Q2 revenues decline of 4.5% Y/Y to €5.34 billion, with currency-neutral revenues remaining flat Y/Y.
Revenues were impacted by a reduction in high inventory levels, mainly in North America and Greater China.
Meanwhile, the revenues benefited from the first sale of some of its Yeezy inventory, with an initial product drop in June generating revenues of around €400 million in Q2 (largely in line with sales in the prior year’s quarter).
Related: Adidas Receives Orders Worth $565M For Massive Unsold Yeezy Inventory: Report
Gross margin improved by 60 basis points to 50.9%, led by implemented price increases and favorable channel mix.
Operating profit declined to €176 million from €392 million a year ago, resulting in an operating margin of 3.3% Vs. 7.0% the prior year, with the sale of the Yeezy product positively impacting by around €150 million in Q2.
On August 2, the company launched a second drop of Yeezy inventory.
Related: Adidas Seeks Next Yeezy Shoes Sale From Inventories In August
EPS from continuing operations fell 74.5% Y/Y to €0.48 in the quarter
As of June 30, 2023, cash and cash equivalents stood at €993 million and inventory rose 1% Y/Y to €5.5 billion.
Outlook: Adidas revised its outlook for currency-neutral revenues to decline at a mid-single-digit rate in 2023 (vs. decline at a high-single-digit rate guided earlier).
The guidance reflects the positive impact of the first sale of some of its Yeezy inventory and slightly better-than-expected business development in H1.
The underlying operating profit is expected to be around the break-even level.
On the other hand, the company now expects an operating loss of €(450) million in 2023 (vs. €(700) million guided earlier), including a positive impact of around €150 million from the first Yeezy drop, expected write-off of the remaining Yeezy inventory of now €400 million (vs. € 500 million earlier) and strategic review related one-off costs of up to €200 million.
Related: Adidas Expects Smaller Operating Loss in 2023 After Parting Ways with Kanye West's Yeezy Collection
Price Action: ADDYY shares closed lower by 2.31% by $97.87 on Wednesday.
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