Adidas shares fell today after the sportswear maker delivered a 2024 forecast well below analyst expectations, based on limited profits from selling off the company's last stocks of Yeezy shoes after its break-up with Kanye West.
The German company's projection echoes statements from Nike, Puma and JD Sports, which have all warned of weaker profits this year as consumers cut back spending on non-essentials.
"It does suggest that consumers are a bit more focused on getting value for money," said Citi analyst Monique Pollard, adding that sportswear companies have found it more difficult to keep shoppers buying at higher price points.
Retailers are still overstocked in the US, too, Pollard said, forcing them to discount products.
Adidas forecast 2024 operating profit of about €500m compared to a €1.294 billion consensus from analyst estimates compiled by the company.
That projection assumes Adidas will sell its remaining Yeezy shoe inventory at cost, but CEO Bjorn Gulden left the door open to possible upgrades, saying that the company's research shows it can sell the shoes "for at least the cost price".
"We're trying to be humble and down-to-earth, and then rather surprise you positively than negatively," Gulden said on a call with analysts.
Adidas struck a cautious note on demand, however, saying North America was a particularly difficult market. Overall the company forecast "mid-single-digit" sales growth for 2024, against analyst expectations of 9%.
"Consumer sentiment around the world is, of course, not great. It's not like people are lining up everywhere to buy product," Gulden said, adding that shipping disruptions in the Red Sea are delaying shipments and driving up costs.
Shares in the company were down more than 5% today.
Adidas reported 2023 operating profit of €268m, down from €669m a year earlier but easily beating the €100m loss previously forecast by the company.
Gulden, in the job since the start of 2023, has been driving a turnaround at the company bruised by its break-up with rapper West, who goes by Ye. Their parting left Adidas with unsold Yeezy shoes worth €1.2 billion.
Adidas reported 2023 sales of €21.4 billion euros, including the Yeezy shoes, and €20.6 billion excluding them.
The company also flagged "severe impact" from devaluation of the Argentine peso at the end of the year, joining rival Puma in reporting a hit to results after the currency was devalued by 54% in mid-December. Argentina is an important market for both sportswear brands.
Adidas is due to report its full fourth-quarter results on March 13.
Meanwhile, the company's CEO Bjorn Gulden said today that shipping disruptions in the Red Sea are negative for gross margins.
In a call with analysts, he added that "exploding" freight rates are driving up costs and shipping delays are causing some delivery issues.
"Currently the spot rates are exploding again so if you don't have a long-term contract or you ship more than your contract there is an increased cost because of that," Gulden said.
"There is a delay currently of about three weeks which of course causes some delivery issues, especially to the European market," he added.
Shipping firms are avoiding the Suez Canal due to attacks on shipping in the Red Sea area and rerouting around the southern tip of Africa, delaying the arrival of clothes and shoes in Europe from factories in Asia.
