The Adidas Q3 financial success and better full-year forecast demonstrate the brand’s tenacity and adaptation in the fast-paced world of sportswear and design.
Adidas AG (ETR: ADS), the renowned German sportswear giant, has made headlines as its shares climbed 4% during early European trading hours this morning, largely thanks to the unexpected success of its Yeezy inventory.
Adidas Full-Year Projections
On Tuesday, the company revealed that it anticipates a full-year operating loss of just 100 million Euros ($160 million), which is a remarkable improvement from the initial projection of a 450 million Euros loss. Adidas also expects revenues to decline at a low-single-digit rate for 2023.
This more optimistic outlook can be attributed to the success of Yeezy inventory sales, a positive impact that was reinforced by two Yeezy drops in the second and third quarters. With these developments in mind, the potential write-off of the remaining Yeezy inventory was adjusted to approximately €300 million, down from the previous estimate of €400 million.
Furthermore, Adidas indicated that one-off costs related to the strategic review would amount to about €200 million, a figure that remains unchanged from its prior estimation. The company’s forward-looking projections now indicate that they expect to report an operating loss of around €100 million in 2023, a marked improvement from the previously forecasted loss of €450 million.
In its earnings report, Adidas revealed, “While the company’s performance in the quarter was again positively impacted by the sale of parts of its remaining Yeezy inventory, the underlying Adidas business also developed better than expected.”
Adidas Terminates Partnership with the Yeezy Brand
The Yeezy brand, originally a collaboration with music and fashion icon Kanye West, became a cultural phenomenon known for its stylish and innovative sneakers. However, the partnership between Adidas and Kanye West came to an abrupt end in October 2022 after the rapper made a series of offensive and antisemitic remarks.
Following this split, Adidas faced the challenge of managing the remaining inventory of Yeezy products, a task that they have been diligently working on. While the termination of the partnership with Kanye West was initially seen as a setback for Adidas, the company has managed to turn the situation around by effectively selling off the remaining inventory of Yeezy products.
The Yeezy brand, with its distinctive and highly sought-after sneakers, has been a significant contributor to Adidas’ revenue in recent years. Despite the controversial separation from Kanye West, it seems that the demand for Yeezy products has not waned, providing Adidas with a financial lifeline during a period of uncertainty. This lifeline is ironic considering the financial strain the breakup caused Kanye West at the time.
The Adidas Q3 financial success and better full-year forecast demonstrate the brand’s tenacity and adaptation in the fast-paced world of sportswear and design. The company’s ability to pivot and make the best of a difficult circumstance has not only pleased investors, but it has also proved its continuous relevance and attractiveness to customers.