Adidas (ADDY), the German sportswear company, posted weaker-than-anticipated fourth-quarter financial results due to the termination of its collaboration with Yeezy, inventory concerns, and a decline in consumer demand in China. The dissolution of the Yeezy collaboration had a negative impact of €600 million on the company’s non-currency-adjusted revenue, causing a 1% decline.
Due to inventory issues, the company’s revenue in Greater China, one of its most important markets, declined by 50%. In addition, margin pressure from increasing supply chain expenses and greater promotional activity to clear inventory contributed to a decline in its net income.
Adidas stock produced a loss of €2.67 per share, exceeding the consensus estimate of €2.64 per share. Adidas anticipates that its constant-currency revenues will decline by a high-single-digit percentage rate in 2023 due to persistent macroeconomic challenges and company-specific issues. In addition, the company’s efforts to reduce its inventory could result in a €1.2 billion revenue loss if the existing Yeezy inventory is not sold.
With the persistent difficulties, analysts are wary about Adidas stock prognosis. Analysts have given the business a Hold rating, with six Buy, nine Hold, and three Sell recommendations. The average price prediction of €143.67 indicates a near 1% decline.
In conclusion, Adidas faces difficulties in Q4 and beyond due to geopolitical and macroeconomic headwinds, inventory issues, and the end of the Yeezy partnership. The company’s efforts to clear out its inventory and dwindling sales may have a negative effect on its bottom line. Given these obstacles, analysts have adopted a prudent forecast for the company’s shares.
