German sportswear giant Adidas revealed second quarter revenues were flat versus the prior-year level at EUR 5.34 billion (USD 5.89 billion), as top-line development continued to be impacted by the company’s conservative sell-in approach in order to reduce high inventory levels, particularly in North America and Greater China.
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Adidas revenues in Greater China grew 16 percent in the second quarter, reflecting double-digit sell-out growth in both wholesale and own retail, while Asia Pacific increased 7 percent during the quarter, driven by strong double-digit growth in DTC.
Globally, currency-neutral sales in wholesale declined 10 percent despite double-digit growth in Greater China and Latin America. Direct-to-consumer (DTC) revenues grew 16 percent, driven by strong growth in both the company’s e-commerce business, up 14 percent, as well as own retail stores, up 19 percent, reflecting continued strong sell-out trends across most regions.
The outperformance of the company’s DTC channel versus the wholesale business was also related to the first sale of the Yeezy inventory, which was done exclusively through Adidas’ own e-commerce channel.
“We are happy with the way the second quarter developed. The core adidas business was slightly better than we expected. Although we still have too much slow-moving inventory in the market, sell-through has been improving. We also saw gross margin in our core business improving strongly compared to the first quarter. The operating profit of EUR 176 million was substantially higher than our initial plans. The sale of the first part of the Yeezy inventory did of course help both our top and bottom line in the quarter,” said Adidas CEO, Bjørn Gulden.
“The market is still very volatile, and we continue to see a lot of uncertainty for the rest of the year. As there is still a lot of inventory in the market, retailers are very cautious in their pre-orders. We believe that when we start to see larger volumes of our hot sellers in the Terrace area like Samba and Gazelle hitting the markets, we will continue to see adidas brand heat improving. This will support the sell-through of all Adidas products in the market.
Looking ahead, Adidas said it is using 2023 “to clean inventories, work on future products, improve the way we work, build better partnerships, and lay the foundation for a better 2024 and a good and profitable adidas in 2025 and 2026,” adding that “2023 is not about trying to show short-term results.”