Adidas AG (OTC:ADDYY) shares tumbled Wednesday after the sportswear brand's 2024 operating profit guidance significantly missed consensus expectations.
In its 2023 results, the company said sales were down 5% to €21.43 billion in 2023, impacted by more than €1 billion in unfavorable currency movements, which are expected to drag on the company's top-line development in 2024.
In addition, the discontinuation of the Yeezy business hurt Adidas's top-line development during the year, representing a drag of around €500 million on the year-over-year comparison.
"The two Yeezy drops positively impacted net sales in an amount of around € 750 million in 2023," said the company. "This compares to a total of more than €1,200 million of Yeezy revenues in 2022."
Regarding Yeezy, Adidas said it plans to sell the remaining products at least at cost in 2024.
Looking ahead, the company expects currency-neutral sales to grow at a mid-single-digit rate. However, with the remaining Yeezy inventory expected to be sold at cost, the planned sale of the product is expected to have no effect on the company's operating profit this year.
Meanwhile, unfavorable currency effects are projected to weigh significantly on Adidas's profitability in 2024. As a result, it expects to generate an operating profit of around €500 million in 2024, well below the Bloomberg consensus estimate of €1.27 billion.
"Despite no assumed profit contribution from Yeezy, the strong unfavorable currency effects, the ongoing challenges in North America, our continued investment in both marketing and sales and a world full of uncertainties, we expect an operating profit of around € 500 million in 2024," said Adidas CEO Bjørn Gulden. "This year is the next building block needed to bring Adidas back to be a company with double-digit growth and 10% operating margin."
The report has seen Adidas ADRs fall more than 8%, while it has also impacted Nike (NYSE:NKE), which is down almost 2%, and Under Armour, which has declined close to 3%.