Adidas AG, the renowned German athletic apparel and footwear corporation, holds a prominent position in the industry, serving as the largest sportswear manufacturer in Europe and the second largest worldwide, trailing only Nike.
With its headquarters based in Herzogenaurach, Bavaria, Germany, Adidas AG oversees the operations of the Adidas Group, which includes a notable 8.33% stake in the esteemed football club Bayern München, as well as the Austrian fitness technology company, Runtastic.
One of the key distinguishing features of Adidas is its iconic three stripes logo, which has become synonymous with the company’s clothing and shoe designs, playing a pivotal role in its marketing endeavors.
In an intriguing turn of events, Adidas acquired the branding in 1952 from Karhu Sports, a Finnish sports company, for a modest sum of €1,600 along with two bottles of whiskey. The three stripes proved to be an immensely successful and recognizable symbol, leading to the moniker “The three stripes company” coined by Dassler, further solidifying Adidas’s brand identity.
As of May 26, 2023, Adidas’s net worth stands impressively at $30.13 billion. This significant valuation reflects the company’s strong market presence, innovative product offerings, and global recognition.
Here’s the breakdown of Adidas net worth (for the quarter ended March 31, 2023):
Name: | Adidas AG (ADDYY) |
Net Worth: | $30.13B |
Annual Revenue: | $23.429B |
Total Assets: | $12.177B |
Total Liabilities | $15.528B |
Table of Contents
Revenue and Product Performance
In the first quarter of 2023, Adidas reported flat currency-neutral revenues compared to the previous year, despite the adverse impact of discontinuing the Yeezy business.
Footwear revenues grew by 1%, driven by strong performance in the Performance categories, while apparel sales declined by 3%. Accessories saw an 8% growth, primarily led by football.
Lifestyle revenues were down, but the company witnessed exceptional demand for its Samba, Gazelle, and Campus franchises.
Regional Sales Analysis
Adidas faced challenges in North America, with a 20% decline in sales, largely attributed to the discontinuation of the Yeezy business and reduced sell-in due to high inventory levels.
Greater China also experienced a 9% decline in total revenues, but the company achieved double-digit sell-out growth in its own retail stores.
Sales in EMEA grew by 4%, driven by high-single-digit growth in Wholesale. Asia-Pacific and Latin America delivered double-digit sales growth in both Wholesale and DTC channels.
Gross Margin and Operating Profit
Adidas’ gross margin declined by 5.1 percentage points to 44.8% in Q1 2023. This decrease was primarily driven by higher supply chain costs, increased discounting, inventory allowances, adverse Yeezy impact, and negative currency movements.
The company’s operating profit reached €60 million, reflecting an operating margin of 1.1%. Other operating expenses increased, with higher logistics and IT costs contributing to the rise.
Inventory Position and Working Capital
Adidas showed improvement in its inventory position, which increased by 25% year-over-year. However, the company continues to work on normalizing inventory levels.
Operating working capital increased by 38%, driven by inventory growth and a decrease in payables. The goal is to reduce elevated inventory levels and improve working capital management.
Full Year Guidance and Potential Losses
Adidas confirmed its full-year guidance for 2023, expecting a high-single-digit decline in currency-neutral revenues due to macroeconomic challenges and geopolitical tensions.
The initiatives to reduce inventory levels and potential revenue losses from existing Yeezy inventory contribute to this projection. The company anticipates an underlying operating profit around the break-even level.
However, if the decision is made not to repurpose any of the existing Yeezy products, it could result in additional losses and a projected operating loss of €700 million for the year.
CEO’s Remarks and Future Outlook
Adidas CEO Bjørn Gulden expressed satisfaction with the company’s performance in Q1 2023 and outlined the progress made.
He acknowledged the challenges faced, such as the decline in North America and discontinuation of the Yeezy business, but also highlighted positive developments in Performance categories and successful product launches.
Gulden emphasized the importance of inventory normalization, increasing full-price sales, and re-establishing brand heat for future success.
While 2023 is expected to be a challenging year, the company remains optimistic about building a strong foundation for better performance in the coming years.
