adidas’ 2022 financial results reflect macroeconomic & company specific headwinds

Global sportwear brand adidas recorded an operating loss of €724 million and a net loss of €482 million from continuing operations during the fourth quarter of 2022. The company’s gross margin declined to 47.3% due to strong increase in supply chain costs and discounting during the 2022 financial year.

On the other hand, its revenues in the Europe Middle East and Africa (EMEA) region were up 9% despite significant adverse impact from the wind-down of the company’s business in Russia during 2022.

In 2023 adidas expects currency-neutral revenues to decline at a high-single-digit rate as macroeconomic challenges and geopolitical tensions persist. Elevated recession risks in Europe and North America as well as uncertainty around the recovery in Greater China continue to exist.

“2023 will be a transition year to build the base for 2024 and 2025,” said adidas CEO Bjørn Gulden. “We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024. adidas has all the ingredients to be successful. But we need to put our focus back on our core: product, consumers, retail partners and athletes. We will work on strengthening our people and the adidas culture. Motivated people and a strong adidas culture are the most important factors to build a unique adidas business model again. A business model built to focus on serving our consumer through both wholesale and DTC that balances global direction with local needs, that is fast and agile, and of course, always invests in sports and culture to keep building credibility and brand heat.”

The company’s revenue development will also be impacted by the initiatives to significantly reduce high inventory levels. The company is reviewing future options for the utilisation of its Yeezy inventory after terminating partnership with Kanye West over antisemitic comments. The guidance, however, already reflects a revenue loss of around €1.2 billion from potentially not selling the existing stock.

Overall, accounting for the corresponding negative operating profit impact of around €500 million adidas’ underlying operating profit is projected to be around the break-even level in 2023.

RetailME Bureau