*While Adidas reported better-than-expected quarterly results and a boost in the Chinese market, Reuters reports that the company is forecasting a loss this year after ending its Yeezy partnership with Kanye West.
Adidas said the loss of its Yeezy line hit sales in the quarter by $440 million, mainly denting revenue across North America, Greater China and EMEA [Europe, Middle East, Africa]. But after six months of bad numbers, investors were uplifted by some early signs of recovery.
The sell-through rate – or the share of product held in inventory that went on to be sold – jumped by 12% in the first quarter in Adidas’ own stores and wholesalers in China, meaning retailers are likely to order more in future, Reuters reports.
“For the first time… (in) the last two and a half years, we are actually optimistic that the numbers will turn from red to green,” said CEO Bjorn Gulden, who joined Adidas from sportswear rival Puma at the start of the year.
“Adidas is managing investors’ expectations,” said Mamta Valechha, equity research analyst at Quilter Cheviot, which holds shares in Adidas.
“They are going in the right direction – China is recovering, inventories are still too high but at least sequentially down,” she added. Clearing out the inventory will be key for Adidas this year.
Adidas’ gross margin fell to 44.8% due to the loss of Yeezy sales, higher supply chain costs and discounts. The company gave no update on what it plans to do with its stock of unsold Yeezy shoes, but Gulden told reporters Adidas has narrowed down the options for the shoes, and is getting closer to a decision.
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