ADS Adidas AG

By Joshua Kirby

Shares in Adidas furthered their rally Friday after the group said first-quarter sales remained stable on the year, and that high inventory levels have eased to some extent.

At 0723 GMT, shares were up 6.2% at EUR166. Year-to-date, the share has risen some 30%, reversing some of the steep declines it suffered last year.

The German sportswear giant notched up sales of 5.27 billion euros ($5.80 billion) in the January-March period, around the same amount as it made in last year's first quarter, adjusted for currency effects. Analysts had expected a sales decline in the period, according to a poll provided by FactSet ahead of the update.

The main drag on sales in the quarter was the discontinuation of the Yeezy line following last year's split with American rapper and designer Kanye West, Adidas said. In North America, sales slumped by 20%, hurt also by cautious sell-in amid high stock levels and promotional activity, the company said. "The loss of Yeezy [is] of course hurting us," Chief Executive Bjorn Gulden said.

Sales in Greater China fell by 9%, a less sharp decline than in previous quarters, with good sell-out growth, Mr. Gulden said.

"This was better than expected and makes us optimistic for the rest of the year," he said.

Inventory levels stood at EUR5.68 billion, 25% higher than the previous year and marking an improvement from the last quarter of 2022, Adidas said, with the level dropping EUR300 million since the beginning of this year.

"Inventories are still too high.. but we continue to work hard to normalize our inventory levels," Mr. Gulden said. The group's gross margin dropped five points to 44.8% as a result of the continued inventory pressures, as well as supply-chain costs.

The results show some stabilization of top-line trends at Adidas, analyst Piral Dadhania at RBC Capital Markets said in a note to clients following the update. He cautioned, however, that consensus expectations aren't likely to change on the back of the results, with Adidas continuing to guide for an operating loss of as much as EUR700 million this year.

Indeed, the update may offer few clues on what to expect ahead, analysts at Jefferies wrote in a note, pointing to uncertainty around inventory levels and the final fate of Adidas's remaining Yeezy stock.

"Parsing Adidas's results for answers is an inherently challenging operation," Jefferies said.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

(END) Dow Jones Newswires

May 05, 2023 03:53 ET (07:53 GMT)

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