Adidas has failed to give an explicit plan of what it is going to do with unsold Yeezy stock.
The Q1 2023 sales performance of Adidas exceeded expectations despite its terminated partnership deal with Ye, formerly Kanye West. Adidas announced an operating profit of 60 million euros, surpassing analysts’ expectations of 15 million euros. However, due to the loss of Yeezy sales, higher supply chain costs, and discounts, Adidas’ gross margin fell to 44.8%.
Adidas in Q1 2023
Though the sale revenue beat expectations, it trails the previous year’s record by 1%. Adidas generated a sales revenue of 5.274 billion euros in Q1 2023, a decline from 2022’s 5.302 billion. According to compiled consensus estimates, analysts expected a year-on-year decrease of 4%.
Last year, Adidas ended its lucrative partnership with Ye without any spelled-out plan to get rid of its stock of unsold Yeezy customized shoes. The Ye crooner made a series of anti-Semitic online posts, which cost him his partnership deal with the sports brand. His Instagram and Twitter accounts were also suspended to that effect.
In response to Ye’s series of posts, the sportswear brand stated: “Adidas does not tolerate antisemitism and any other sort of hate speech. Ye’s recent comments and actions have been unacceptable, hateful, and dangerous, and they violate the company’s values of diversity and inclusion, mutual respect and fairness.”
As expected, Adidas’ sales in Q1 2023 declined by 400 million euros ($441.56 million), affecting revenue generation in North America, Greater China, and EMEA regions. The Yeezy crisis majorly affected the North American market and Greater China, with a YoY sales decline of 20% and 9%, respectively. Surprisingly, Adidas sales in Q1 2023 jumped by 4% in EMEA regions. Adidas’ Q1 revenue in Latin America puts up a stunning performance with a 48.7% increase.
Why Did Adidas’ Sales Revenue Plummet in Q1?
Speaking on the declined sales revenue, the CEO of Adidas Bjorn Gulden has explained that the decline in the sale of the Yeezy collection is the key factor behind their plummeting sales revenue. Despite the Q1 2023 performance, the Adidas executive remains optimistic about the three other quarters of the year, saying:
“Q1 ended a little better than we had expected. We still have a long way to go, but I am very happy with the progress we have made and what we have achieved so far.”
The sportswear brand has explained that other factors like geopolitical uncertainties, economic headwinds, and consumer sentiment will affect its sales performance in 2023. Adidas has failed to give an explicit plan of what it is going to do with unsold Yeezy stock. The closure of the Yeezy inventory will slough Adidas’ operating profits by €500 million in addition to the projected one-off cost of €200 million. Overall, Adidas will expectedly lose approximately €700 million in 2023.
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