adidas surprises in the first quarter
“I am very happy to see that the business in Q1 developed better than we had expected. Sales, gross margin, and operating profit were all better than initially planned. Our full-price sales in our DTC channels were strong and our sell-out with our retail partners was higher than the sell-in. This means lower inventories, less discounts, and better gross margins both for our retail partners and for us”, commented adidas CEO Bjørn Gulden. “The markets are still volatile and not easy, but we feel we are making progress everywhere”, he added.
First Quarter Results
In the first quarter of the current fiscal year, adidas’ currency-neutral revenue rose by 8%, on a comparable basis to the same period of last year, reflecting healthy underlying business growth of 5% year-over-year. In euro terms, revenue grew by 4% year-over-year to 5.46 billion euros.
The company highlighted that revenue from the footwear segment increased by 13% on a currency-neutral basis in the first three months of the year, “driven by the strong brand momentum, particularly in the Originals and Football categories”, as compared to the first quarter the previous year. Meanwhile, apparel sales increased moderately by 1% versus the prior year, while accessories sales declined by 1% versus the prior year.
On a comparable basis to the prior year, adidas’ direct-to-consumer (DTC) business grew strongly by 20% on a currency-neutral basis in the first quarter of 2024, driven by increases in both retail (up by 11%) and e-commerce (up by 34%), while the wholesale business revenue rose by 2%, still impacted by high inventory levels in North America.
In fact, sales in North America declined 4% year-over-year in the quarter, “as the company continued its disciplined sell-in approach” to reduce inventory. On the other hand, adidas’ currency-neutral sales were up by 14% in Europe, by 17% and 18% in Emerging Markets and Latin America, by 8% in Greater China and by 7% in Japan/South Korea, on a comparable basis to the same quarter of 2023.
In the three months to the end of March, the company’s gross margin improved by 6.4 percentage points to 51.2% from 44.8% in the same period a year ago, thanks to “much healthier inventory levels, reduced discounting, lower sourcing costs, and a more favourable business mix”. “While the Yeezy drop in Q1 contributed positively to the gross margin development, the company’s first quarter gross margin was also above 50%, if adjusted for the Yeezy impact”, stressed adidas.
adidas reported an operating profit of 336 million euros in the first quarter of the year, as compared to 60 million euros in the same period of last year, and a net income from continuing operations of 171 million euros, as compared to a net loss of continuing operation of 24 million euros.
Image Credits: runnersworld.com