Adidas failed to provide a clear plan for what it would do with unsold Yeezy stock.
Adidas’ sales performance in the first quarter of 2023 exceeded expectations despite the termination of its partnership agreement with Ye, formerly known as Kanye West. Adidas reported operating profit of €60 million, beating analysts’ expectations of €15 million. However, due to lost Yeezy sales, higher supply chain costs, and discounts, Adidas’ gross margin fell to 44.8%.
Adidas in the first quarter 2023
Although sales revenue beat expectations, it trailed the previous year’s record by 1%. Adidas generated sales revenue of €5.274 billion in the first quarter of 2023, down from 2022’s €5.302 billion. According to a combined estimate, analysts had expected a 4% year-over-year decline.
Last year, Adidas ended its lucrative partnership with Ye without any specific plan to get rid of its inventory of unsold custom Yeezy shoes. Ye crooner made a series of anti-Semitic posts online, which cost him his partnership deal with the sports brand. His Instagram and Twitter accounts have also been suspended for this.
In response to Ye’s series of posts, the sportswear brand stated: “Adidas does not tolerate anti-Semitism and any other kind of hate speech. Ye’s recent comments and actions were unacceptable, hateful and dangerous, and they violate the company’s values of diversity, inclusion, mutual respect and fairness.”
As expected, Adidas sales in the first quarter of 2023 fell by 400 million euros ($441.56 million), affecting revenue generation in North America, Greater China and EMEA regions. The Yeezy crisis greatly affected the North American market and Greater China, with year-over-year sales down 20% and 9%, respectively. Surprisingly, Adidas sales in the first quarter of 2023 jumped 4% in the EMEA regions. Adidas’ first-quarter revenue in Latin America performed impressively with an increase of 48.7%.
Why did Adidas sales revenue decline in the first quarter?
Speaking about the decline in sales revenue, Adidas CEO Bjorn Gulden explained that the decrease in the sale of the Yeezy collection is the main factor behind the decrease in sales revenue. Despite the performance of the first quarter of 2023, the Adidas CEO remains optimistic about the other three quarters of the year, say:
“The first quarter ended a little better than we expected. We still have a long way to go, but I’m very pleased with the progress we’ve made and what we’ve achieved so far.”
The sportswear brand has made it clear that other factors such as geopolitical uncertainty, economic headwinds and consumer sentiment will affect its sales performance in 2023. Adidas failed to provide a clear plan for what it will do with unsold Yeezy stock. Closing Yeezy’s inventory would cut Adidas’ operating profit by €500 million plus its expected one-time cost of €200 million. Overall, Adidas is expected to lose about 700 million euros in 2023.
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Ibukun is a crypto/financial writer interested in passing on relevant information, using uncomplicated words to reach all types of audiences. Apart from writing, she loves watching movies, cooking, and exploring restaurants in the city of Lagos where she is staying.