Adidas, the prominent German athletic apparel and footwear company, has reported a decline in net profit and sales for the third quarter. Despite ongoing efforts to reduce high inventory levels, net profit fell by 25% to 259 million euros ($277.1 million) compared to the previous year.
The company’s revenue declined by 6.4% to EUR6 billion, although currency-neutral revenue saw a 1% increase. Operating profit also suffered, dropping from EUR564 million to EUR409 million, resulting in an operating margin of 6.8% compared to 8.8% in 2022.
While the third-quarter results were slightly better than expected, Adidas acknowledges that its current performance is not satisfactory. However, it did manage to decrease inventory levels by more than anticipated, experiencing a 23% decrease compared to the previous year. Over the first nine months, inventories fell by over EUR1.1 billion.
Despite these challenges, Adidas remains optimistic and stands by its recently updated guidance for 2023. This positive outlook is primarily due to inventory reductions in the Yeezy line and a stronger-than-expected underlying business performance. The company expects currency-neutral revenues to decline at a low single-digit rate, with underlying operating profit around EUR100 million, excluding any one-off costs related to Yeezy and the ongoing strategic review.
Unfortunately, Adidas also forecasts an operating loss of approximately EUR100 million for this year. However, it remains committed to implementing necessary measures to improve its financial position and overall performance.