German sportswear and athletic footwear manufacturer Adidas has released preliminary financial results for the second quarter (Q2) of fiscal year 2023 (FY23), reporting revenues of €5.343 billion. This represents a 5 percent decline compared to the same period in the previous year, which saw revenues of €5.596 billion. Despite the drop in euro-denominated terms, the company noted that its currency-neutral revenues remained largely unchanged compared to the prior year, reflecting stable underlying demand.
The company’s gross margin showed modest improvement, rising 0.6 percentage points to 50.9 percent in Q2 FY23, up from 50.3 percent in the same quarter of FY22. Conversely, Adidas’ operating profit experienced a sharp decline, falling to €176 million from €392 million a year earlier, resulting in an operating margin of 3.3 percent, down from 7 percent. Analysts highlighted that while margins benefited slightly from operational efficiency, profitability pressures persisted due to elevated costs and strategic initiatives.
A notable factor supporting Q2 results was the initial sale of select Yeezy inventory, which the company announced at the end of May. Adidas indicated that, aside from the Yeezy contribution, the performance of its core business slightly exceeded expectations. This helped mitigate some of the broader revenue pressures during the quarter.
Following these results, Adidas revised its full-year guidance for FY23. The company now anticipates a mid-single-digit decline in currency-neutral revenues, an improvement over its prior forecast of a high-single-digit drop. While the underlying operating profit, excluding one-off items related to the Yeezy inventory and the ongoing strategic review, is expected to break even, total operating results reflect several adjustments. These include the positive contribution from the first Yeezy drop, a potential write-off of the remaining €400 million in Yeezy inventory (reduced from €500 million), and one-off strategic review costs of up to €200 million. Taking these factors into account, Adidas now projects an operating loss of €450 million for FY23, an improvement from the previously anticipated €700 million.
Overall, while revenue pressures persist, Adidas’ Q2 performance demonstrates resilience in its core business and highlights the impact of strategic inventory management and operational initiatives on its financial outlook.
