Adidas Q2 Preliminary Operating Profit Down; Updates FY Guidance

German sportswear brand Adidas (ADDDF.PK) reported that its preliminary operating profit for the second quarter of 2023 declined to 176 million euros from 392 million euros in the prior year.

In the second quarter, currency-neutral revenues were flat versus the prior year level. In euro terms, the company’s revenues declined 5% to 5.343 billion euros from the previous year.

The company noted that its top- and bottom-line development in the quarter was positively impacted by the first sale of some of its Yeezy inventory as announced at the end of May. In addition, the underlying adidas business also developed slightly better than expected.

Therefore, the company has updated its full year guidance. It now expects currency-neutral revenues to decline at a mid-single-digit rate in 2023. Previously it was expected to decline at a high-single-digit rate.

At the same time, the company’s underlying operating profit – excluding any one-offs related to Yeezy and the ongoing strategic review – is still anticipated to be around the break-even level.

Including the positive impact from the first Yeezy drop, the potential write-off of the remaining Yeezy inventory of now 400 million euros and one-off costs related to the strategic review of up to 200 million euros, the company now expects to report an operating loss of 450 million euros in 2023 compared to the prior outlook of loss 700 million euros.

If successful, potential future Yeezy drops would further improve the company’s results, Adidas said.

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