Adidas Beats Expectations in Q1, Returns to Profitability

BERLIN – Adidas‘ new era under chief executive officer Bjorn Gulden is proceeding at pace, with the company beating expectations in the fiscal first quarter and returning to profitability.

Adidas sales grew 8 percent at constant exchange to 5.46 billion euros. The company also returned to profitability, with an operating profit of 336 million euros, up from 60 million euros during the same period last year.

In 2023, the company had announced its first annual loss in three decades due to high inventories and the termination of its relationship with Ye, formerly known as Kanye West.

“I am very happy to see that the business in Q1 developed better than we had expected,” said Gulden, who arrived a year ago. “The markets are still volatile and not easy, but we feel we are making progress everywhere.”

All markets saw growth except North America, where sales fell 3.6 percent at constant exchange rates to 1.12 billion euros, reflecting a double-digit decline in the wholesale channel. Adidas has been battling high inventory levels, low consumer demand, and overstocked stores in North America for some time, and has been taking “a conservative approach” to selling into the market.

Elsewhere, the news was better. In Europe, the company’s biggest market, sales rose 13.8 percent at constant exchange to 1.73 billion euros.

In Greater China, they grew by 7.8 percent to 897 million euros. In Latin America, Japan/South Korea and emerging markets, sales rose 17.6 percent, 7.5 percent and 16.8 percent, respectively. Together, those three regions accounted for 1.66 billion euros in sales in the first quarter.

Gulden said Adidas’ lifestyle products, and especially Originals , drove growth.

“But we also see that the higher end of our running, football and basketball product is doing well. We feel we have a very strong pipeline of product for the next quarters,” he added.

Footwear sales rose 13 percent on a constant currency basis to 3.24 billion euros. Apparel sales increased 2 percent to 1.88 billion euros.

Adidas said the slower growth in apparel was due to high inventory levels, especially in North America, although the company added it was already seeing some improvement in this area. Revenue from accessories fell slightly, decreasing by 1 percent to 328 million euros.

Adidas’ earnings before income and taxes rose to 554 million euros from 344 million euros in the corresponding period last year.

The return to profitability was a milestone. The German sportswear giant had struggled during 2023 due to high inventories and the hangover from its 2022 breakup with West and the profitable line he helped create.

In mid-April, when releasing preliminary Q1 results, the German brand had already lifted guidance for the year. Adidas now expects revenues at constant exchange to rise at a mid- to high single-digit rate during the year. Previously it had expected revenue to increase at a mid-single-digit rate.

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