Adidas Shares Climb After 1Q Sales Proved to Be More Robust Than Feared
May 05 2023 - 4:08AM
Dow Jones News
By Joshua Kirby
Shares in Adidas furthered their rally Friday after the group
said first-quarter sales remained stable on the year, and that high
inventory levels have eased to some extent.
At 0723 GMT, shares were up 6.2% at EUR166. Year-to-date, the
share has risen some 30%, reversing some of the steep declines it
suffered last year.
The German sportswear giant notched up sales of 5.27 billion
euros ($5.80 billion) in the January-March period, around the same
amount as it made in last year's first quarter, adjusted for
currency effects. Analysts had expected a sales decline in the
period, according to a poll provided by FactSet ahead of the
update.
The main drag on sales in the quarter was the discontinuation of
the Yeezy line following last year's split with American rapper and
designer Kanye West, Adidas said. In North America, sales slumped
by 20%, hurt also by cautious sell-in amid high stock levels and
promotional activity, the company said. "The loss of Yeezy [is] of
course hurting us," Chief Executive Bjorn Gulden said.
Sales in Greater China fell by 9%, a less sharp decline than in
previous quarters, with good sell-out growth, Mr. Gulden said.
"This was better than expected and makes us optimistic for the
rest of the year," he said.
Inventory levels stood at EUR5.68 billion, 25% higher than the
previous year and marking an improvement from the last quarter of
2022, Adidas said, with the level dropping EUR300 million since the
beginning of this year.
"Inventories are still too high.. but we continue to work hard
to normalize our inventory levels," Mr. Gulden said. The group's
gross margin dropped five points to 44.8% as a result of the
continued inventory pressures, as well as supply-chain costs.
The results show some stabilization of top-line trends at
Adidas, analyst Piral Dadhania at RBC Capital Markets said in a
note to clients following the update. He cautioned, however, that
consensus expectations aren't likely to change on the back of the
results, with Adidas continuing to guide for an operating loss of
as much as EUR700 million this year.
Indeed, the update may offer few clues on what to expect ahead,
analysts at Jefferies wrote in a note, pointing to uncertainty
around inventory levels and the final fate of Adidas's remaining
Yeezy stock.
"Parsing Adidas's results for answers is an inherently
challenging operation," Jefferies said.
Write to Joshua Kirby at joshua.kirby@wsj.com;
@joshualeokirby
(END) Dow Jones Newswires
May 05, 2023 03:53 ET (07:53 GMT)
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