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Adidas has reported an operating profit of €268m (£229m) in 2023, compared with its previous guidance of a €100m (£85m) loss, which was driven by a better-than-expected operational business in Q4 and the company’s decision not to write off the vast majority of its existing Yeezy inventory.
The 2023 operating profit now only includes a low double-digit million amount of Yeezy write-offs, down from a potential write-off of €300m (£256m) in the previous outlook guidance.
Instead, the company plans to sell the remaining Yeezy product at least at cost price in 2024, which would result in sales of around €250m (£213m).
Additionally, taking into account foreign exchange headwinds and the current Yeezy outlook, the company expects to generate an operating profit of around €500m (£427m) in 2024.
Bjørn Gulden, Adidas CEO, said: “Our fourth quarter developed a little better than expected and we have decided to release preliminary numbers. For the full year our currency-neutral revenues were flat, and we reached an operating profit of €268m (£229m). This is €368m (£314m) better than what we guided for. The improvement is due to the better operating business of around €100m (£85m) and the decision to not write off € 268m (£228.8m) of Yeezy inventory. Our consumer, retail and trade research has shown that we can sell this remaining inventory in 2024 for at least the cost price. This is why we have only written off inventory that was either damaged or very broken in sizes…
“For 2024, we expect sales to start flattish, but to then improve every quarter. We expect the underlying Adidas business (excluding Yeezy) to grow in the high-single-digits for the full year and to be up at least 10% in H2.”
He added: “Despite no assumed profit contribution from Yeezy, the strong unfavourable currency effects, the ongoing challenges in North America, our continued investment in both marketing and sales and a world full of uncertainties, we expect an operating profit of around €500m (£427m) in 2024.This year is the next building block needed to bring adidas back to be a company with double-digit growth and 10% operating margin.”
