Adidas joins sportswear peers in warning of tough 2024

By Helen Reid

LONDON (Reuters) -Adidas shares fell on Thursday 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 United States, too, Pollard said, forcing them to discount products.

Adidas forecast 2024 operating profit of about 500 million euros ($539.95 million) versus a 1.294 billion euro 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% by 1130 GMT.

Adidas reported 2023 operating profit of 268 million euros, down from 669 million euros a year earlier but easily beating the 100 million euro 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 euros.

Adidas reported 2023 sales of 21.4 billion euros including the Yeezy shoes and 20.6 billion euros 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 reports full fourth-quarter results on March 13.

($1 = 0.9260 euros)

(Reporting by Helen Reid; editing by David Goodman and Jason Neely)