Adidas said its profit in 2024 will be hit by unfavourable currency movements, but it plans to mitigate some of the damage by continuing to sell leftover inventory from its defunct Yeezy partnership with the rapper Ye, formerly known as Kanye West.
The company expects to generate an operating profit of around €500 million (S$724.7 million) in 2024, according to a statement on Jan 31. That is below the average analyst estimate of €1.27 billion.
“We do of course know that our financial performance is not good,” chief executive Bjorn Gulden said in the statement.
But, he added, “the attitude and agility in our teams are back”, and the company is “showing the old Adidas DNA again”.
The German shoemaker said it will sell remaining Yeezy inventory at cost, generating sales of €250 million, rather than writing it off.
Despite a €1 billion currency hit from factors including a devaluation of the Argentine peso in 2023, Adidas forecast a return to growth in 2024 as it continues its turnaround efforts in the face of mounting concerns about global demand for sneakers and sports gear.
Currency-neutral sales will probably rise by a percentage in the mid-single digits in 2024, Adidas said.
That is roughly in line with what analysts were estimating. The company expects sales to start out “flattish” in 2024 and then improve every quarter.
Mr Gulden is entering his second year at the helm of Adidas, where he has inherited a collection of crises from his predecessor.
The Norwegian has a history of offering conservative outlooks early in the year and repeatedly outperforming them, a hallmark of his decade-long tenure as CEO of crosstown rival Puma.
In 2023, Adidas’s currency-neutral revenue stayed flat, which was an improvement upon earlier targets, the company said.
Investors have been looking for signs of weakness in the sector after Nike raised doubts in December about consumer demand in China and around the world and Puma warned about the impact of hyperinflation in Argentina.
The company could conceivably boost its earnings if it can make more money off of its remaining Yeezy inventory rather than merely recoup costs, as is its current plan.
It has now written off only Yeezy inventory that was “either damaged or very broken in sizes”, Mr Gulden said.
Bloomberg Intelligence analyst Sydney Goodman said that execution in areas such as developing new products and strengthening wholesale relationships will be key to improving profitability.
“Getting back to a double-digit operating margin may take more time.” BLOOMBERG
