The devaluation of the Argentine peso, increasing cautiousness among inflation-weary consumers, and ongoing fallout from at least one severed partnership are conspiring to create sobering profit outlooks for some of the world’s biggest sportswear brands.
Adidas’s 2024 financial guidance, released Wednesday, predicts operating profit of 500 million euros ($543 million), far short of analyst expectations of around 1.3 billion euros. After the news, the company’s share price slid by almost 9%, although it has since regained ground.
The sportswear giant’s weak projections come after breaking ties in 2022 with Ye (formerly known as Kanye West), whose Yeezy sneakers brought in revenue of $1.3 billion for the company that year. The brand parted ways with Ye after his public slew of antisemitic comments prompted several other brands—including JPMorgan and Balenciaga, as well as talent representative Creative Artists Agency—to cut ties with the artist.
Adidas continues to sell its remaining inventory of discontinued Yeezys, which the brand says helped it shatter expectations of a 100-million-euro operating loss with 268 million euros in operating profit. The brand expects that its plans to continue selling its remaining Yeezy inventory will generate around 250 million euros in sales in 2024. Dropping Ye, and his lucrative line of sneakers, meant a $540 million loss in revenue for the company in 2023.
Adidas’s conservative predictions come as several other sportswear companies warn of similarly bleak profits for 2024. On a conference call in December, Nike downsized its annual sales forecast, citing a weaker online business, consumers’ cautious spending habits, and more promotions. The brand also announced plans to adjust its infrastructure to save $2 billion in the next three years.
Last week, Puma announced projected earnings of between 620 million and 700 million euros, below analysts’ forecast of 726 million euros. The company pointed to slowing demand and a rough economy. “For 2024, we foresee the geopolitical and macroeconomic challenges, as well as highly volatile currencies, to persist,” Puma CEO Arne Freundt said, adding that these factors will affect consumer demand.
Both Puma and Adidas cited the considerable devaluation of the Argentine peso at the end of 2023 as a leading financial concern for revenues in 2024.
British sportswear company JD Sports also trimmed its 2024 forecast in January, from a previous forecast of 1.04 billion pounds to between 915 million and 935 million pounds for the company’s fiscal year ending this month.
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