Adidas, the German sporting-goods company, announced that its revenue and operating profit for the year 2023 exceeded company guidance. This positive outcome can be attributed to a stronger-than-expected performance in the fourth quarter and the decision not to write off most of its Yeezy inventory.
Steady Revenue Despite Challenges
On a currency-neutral basis, sales remained flat compared to the previous year despite the devaluation of the Argentine peso in the fourth quarter. This outperformed Adidas's initial forecast of a low-single-digit rate contraction. However, in reported terms, annual sales experienced a 5% decline, amounting to 21.43 billion euros ($23.24 billion).
Operating Profit Outperforms Expectations
While Adidas's operating profit for 2023 declined to EUR268 million from EUR669 million in 2022, it still surpassed the company's projected EUR100 million operating loss. On an underlying basis, the operating profit reached approximately EUR200 million in 2023, exceeding the guidance of around EUR100 million.
Strategic Decisions Drive Improvement
According to Chief Executive Bjorn Gulden, the company's improved performance can be attributed to a better operating business, contributing around EUR100 million, and the decision not to write off EUR268 million of Yeezy inventory. Market research has indicated that the remaining inventory can be sold in 2024 at its cost price.
Gulden anticipates a "flattish" start to sales for this year, with revenue expected to improve steadily throughout each quarter. The company is aiming for mid-single-digit currency-neutral sales growth and an operating profit of approximately EUR500 million in 2024. Gulden emphasizes that this year is key in bringing Adidas back to double-digit growth and achieving a 10% operating margin.