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adidas posts weak fourth quarter

Mar 10, 2023 Germany
adidas posts weak fourth quarter
The company swung to loss in the last quarter of 2022 and saw its annual profit fall by 83%, reflecting the impact of a poor performance in China and the end of the Yeezy partnership
In the fourth quarter of fiscal 2022, adidas' currency-neutral revenue decreased by 1%, year-over-year, “reflecting a negative impact of around 600 million euros related to the company's decision to terminate the Yeezy partnership at the end of October”. In euro terms, adidas' revenue increased by 1%, reaching 5.21 million euros, as compared to the revenue of 5.14 million euros registered in the same period of the prior year.

By region, in the last quarter of fiscal 2022, the company's revenue plummeted in Greater China by 50%, “due to the challenging market environment, company-specific challenges as well as significant inventory takebacks”. In Latin America, Asia-Pacific and the EMEA regions, revenue in this period grew at double-digit rates of 47%, 16% and 12%, respectively. In North America, currency-neutral sales grew by 6%, due to the “particularly strong impact” of Yeezy’s partnership discontinuation.

The company reported a fourth quarter gross margin decline of 9.9 percentage points to 39.1% from 49.0% in the same period of 2021, driven “by significantly higher supply chain costs as well as the strong increase in promotional activity”, which “could not be offset by price increases, positive currency developments and a positive channel and market mix”.

In the three months to the 31st of December, adidas' net loss from continuing operations totalled 482 million euros, including one-off costs of around 50 million euros mainly related to restructuring costs, on a comparable basis to the 123 million euros net income recorded in the same quarter of 2021. Accordingly, both basic and diluted earnings per share from continuing operations were negative 2.69 euros in this period (2021: 0.58 euros).

Fiscal 2022 Results

Last year, adidas' currency-neutral revenue was up by 1% over fiscal 2021; in euro terms, the company's revenue increased by 6% in 2022, reaching 22.51 million euros, as compared to the revenue of 21.23 billion euros in the prior year.

From a market perspective, over the prior fiscal year, the German-based company recorded a currency-neutral sales growth of 44% in Latin America and 12% in North America, as compared to 2021. In the EMEA region, adidas revenue was up by 9%, “amid the significant adverse impact from the wind-down of the company's business in Russia” and, in the Asia-Pacific region, it grew by 4%, year-over-year. In Greater China, however, revenue dipped by 36% in 2022, on a comparable basis to 2021, “due to the challenging market environment, company-specific challenges as well as significant inventory takebacks”.

As of the 31st of December 2022, adidas' net income from continuing operations amounted to 254 million euros, declining by 83% as compared to the net income of continuing operations of 1.49 billion euros recorded over the full year 2021.


Fiscal 2023 Outlook

For the current fiscal year, the company is expecting currency-neutral revenue to decline at a high-single-digit rate. 2023 will be a transition year to build the base for 2024 and 2025. 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”, commented Bjørn Gulden, CEO of adidas.


Image Credits: theimpression.com


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