By Tim Loh
Adidas AG has yet to decide on what to do with its mountain of unsold Yeezy sneakers but new Chief Executive Officer Bjorn Gulden said its turnaround is nonetheless off to a good start.
The German sneaker maker still expects to post a loss of €700 million ($773 million) this year if it can’t sell the Yeezy products, though it’s making headway in improving operations and relations with suppliers and retailers, according to a statement Friday.
Adidas reported sales of €5.3 billion in the first quarter, roughly in line with a year ago and ahead of analysts’ estimates. Business was stronger in Latin America and parts of Asia, while the company is ramping up production of the classic Samba, Gazelle and Campus sneakers to serve high demand.
The shares rose as much as 6% in early German trading, the biggest intraday gain in three months.
This will be a bumpy year with disappointing numbers, and Adidas isn’t worried about maximizing its short-term financial results, Gulden said in the statement. Instead, it’s focused on building a strong base for a better 2024 and beyond.
That will require more markdowns to reduce the €5.7 billion inventory of unsold sneakers and apparel. While that figure is down from late December, the stockpiles are still too high for Adidas to really rebuild its brand momentum, the company said.
Read more: Adidas Faces Investor Unrest After Yeezy Row and Poor Sales
Adidas is still reviewing its options for the €1.2 billion pile of unsold Yeezy merchandise stemming from the cancelled collaboration with the rapper and designer Ye, formerly known as Kanye West. Adidas terminated that partnership in October after the performer made a string of antisemitic remarks.
Investors are looking for signs that Gulden is injecting fresh optimism into the brand since taking over as CEO in January. In nearly a decade leading cross-town rival Puma SE, he refocused that company on sports and roughly tripled its sales, including posting fast growth during the pandemic.
Gulden is looking to renew the focus at Adidas on performance sports, and working to speed up decision-making, including installing himself as the company’s head of global brands. One of his first moves has been scaling up production for hot-selling sneakers like the Samba, which in recent months began appearing on the feet of celebrities including Bella Hadid and Kylie Jenner.
(Updates with shares in fourth paragraph)
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