German sportswear giant Adidas' revenue at €10.617 bn in H1 FY23

The company's gross margin experienced a fall of 2.3 percentage points to 47.9 per cent from 50.1 per cent in FY22 during the first half of the year. Meanwhile, other operating expenses rose by 4 per cent to €4.949 billion in the same period. Net income from continuing operations was €73 million, a significant drop from €671 million in H1 FY22, while basic and diluted earnings per share from continuing operations declined to €0.29 from €3.47 in H1 FY22, the company said in a press release.

Adidas' inventory level has shown substantial improvement during the second quarter. On a year-over-year basis, inventories have increased only 1 per cent to €5.540 billion, a 6 per cent growth on a currency-neutral basis compared to the prior year.

In Q2 FY23, Adidas saw flat currency-neutral revenues, influenced by the company’s conservative approach to selling in to reduce high inventory levels, especially in North America and Greater China. Despite this, Adidas' Q2 revenues benefited from the first sale of some Yeezy inventory, generating revenues of around €400 million, keeping it largely in line with the prior year's quarter.

Footwear revenues grew 1 per cent in Q2 FY23, boosted by strong growth in football, basketball, tennis, and US sports. Apparel sales declined 3 per cent, while accessories grew 8 per cent during the quarter. In euro terms, the company's revenues declined 5 per cent to €5.343 billion in Q2 FY23.

The company's efforts to reduce high inventory levels resulted in a 10 per cent decrease in currency-neutral wholesale sales, even with double-digit growth in Greater China and Latin America. Direct-to-consumer (DTC) revenues grew 16 per cent, driven by strong growth in the company's e-commerce business and own retail stores.

In regional performance, sales in North America declined 16 per cent, while Greater China witnessed a growth of 16 per cent. EMEA sales fell slightly by 1 per cent, and Asia-Pacific saw a 7 per cent increase. Latin America continued its double-digit growth at 30 per cent.

Adidas' Q2 FY23 gross margin improved to 50.9 per cent from 50.3 per cent in Q2 FY22. Operating profit stood at €176 million, resulting in an operating margin of 3.3 per cent. After taxes, the company's net income from continuing operations amounted to €96 million, with basic EPS from continuing operations decreasing to €0.48 from €1.88 in 2022.

“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 €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 Bjorn Gulden.

Fibre2Fashion News Desk (DP)