Outlook Information

In 2024, we expect macroeconomic challenges and geopolitical tensions to persist. While this may negatively affect consumer sentiment and discretionary spending power, the global sporting goods industry is set to benefit from major sports events in 2024. Against this backdrop, we plan to return to top-line growth this year and expect currency-neutral sales to increase at a mid-single-digit rate in 2024. This top-line guidance assumes that we will sell the remaining Yeezy inventory at cost, which would result in sales of around € 250 million in 2024 and no operating profit contribution. This compares to Yeezy revenues of around € 750 million and profits of around € 300 million in 2023. Unfavorable currency effects are also projected to weigh significantly on the company’s profitability in 2024, as we expect them to continue to adversely impact both reported revenues and the gross margin development. Taking all of this into account – the expected translational and transactional FX headwinds as well as the current Yeezy assumptions – we expect to generate an operating profit of around € 500 million in 2024.

Forward-looking statements

This Management Report contains forward-looking statements that reflect Management’s current view with respect to the future development of our company. The outlook is based on estimates that we have made on the basis of all the information available to us at the time of completion of this Annual Report. In addition, such forward-looking statements are subject to uncertainties which are beyond the control of the company. In case the underlying assumptions turn out to be incorrect or described risks or opportunities materialize, actual results and developments may materially deviate (negatively or positively) from those expressed by such statements. adidas does not assume any obligation to update any forward-looking statements made in this Management Report beyond statutory disclosure obligations. SEE RISK AND OPPORTUNITY REPORT

Global economic growth to further decelerate in 2024¹

Global gross domestic product (GDP) growth is expected to further decelerate to 2.4% in 2024 considering the effects of tight monetary policy, restrictive financial conditions, and weak global trade. Despite declining rates, inflation remains above target in most advanced economies. Hence, monetary policy is forecast to stay restrictive in the short term. Additionally, the conflict in the Middle East on top of the ongoing war in Ukraine is set to continue to impact the global economy. While advanced economies are forecast to see growth of only 1.2%, conditions for developing economies are slightly improving, with growth projected at 3.9% in 2024. However, downside risks persist in the form of weaker-than-expected momentum in major economies in Greater China, North America, and Europe. In addition, a potential escalation of geopolitical conflicts can lead to a resurgence in energy prices and further dampen consumer demand. Ultimately, potential supply-chain disruptions and climate-related disasters remain a concern for the global economy.

Sporting goods industry to benefit from major events in 2024

After proving its resilience in 2023, the global sporting goods industry is set to benefit from major sports events in 2024, such as the UEFA EURO 2024 in Germany, the CONMEBOL Copa América 2024, and the Olympic Games Paris 2024. At the same time, existing global trends such as ‘athleisure,’ increasing sports participation rates, and rising health and fitness awareness continue to support industry growth. Innovative Performance and Lifestyle product newness excites consumers in physical and digital channels alike. Hence, the sporting goods industry is expected to remain fundamentally attractive in the long term. On the other hand, the sector continues to face several challenges in 2024. Even though most markets globally returned to healthier inventory levels, North America is expected to continue facing excess stock, especially in the first half of 2024. Furthermore, elevated inflation and interest rates are set to negatively affect household savings and limit discretionary spending power. Additionally, escalating geopolitical conflicts may lead to global trade disruptions, despite the increased resilience of supply chains in recent years.

Currency-neutral sales to increase at a mid-single-digit rate in 2024

In 2024, macroeconomic challenges and geopolitical tensions are projected to persist. Against this backdrop, we plan to return to top-line growth by scaling successful franchises, introducing new ones, and leveraging our significantly better, broader, and deeper product range. Improved retailer relationships, more impactful marketing initiatives, and the company’s activities around major sports events will also contribute to the sales increase. As a result, we expect currency-neutral sales to grow at a mid-single-digit rate in 2024.

This top-line guidance assumes that we will sell the remaining Yeezy inventory at cost, which would result in sales of around € 250 million in 2024. This compares to Yeezy revenues of around € 750 million in 2023. Excluding the Yeezy revenues in both years, the top-line guidance reflects currency-neutral growth at a high-single-digit rate in the underlying adidas business. We expect the sales development to accelerate throughout the year, as growth in the first half will still be negatively impacted by our initiatives to bring down elevated inventories in the North American market. In the second half of the year, we project the underlying adidas business to grow at a double-digit rate.

Currency-neutral revenues to grow significantly in almost all market segments

Currency-neutral revenues in the underlying adidas business are expected to grow significantly in all markets except North America. In this market, currency-neutral net sales are expected to decline at a mid-single-digit rate in 2024. This is mainly the result of our continued disciplined sell-in to the wholesale channel during the first half of the year as part of our initiatives to reduce high inventory levels in this particular market. In contrast, we expect the underlying adidas sales in Greater China and Latin America to grow at a double-digit rate in 2024. Currency-neutral revenues in Europe, the Emerging Markets, and Japan/South Korea are expected to grow at a high-single-digit rate versus the prior-year level.

Expected operating profit of around € 500 million

Unfavorable currency effects are projected to weigh significantly on the company’s profitability in 2024, as we expect them to continue to adversely impact both reported revenues and the gross margin development. Taking the expected translational and transactional FX headwinds into account, we expect to generate an operating profit of around € 500 million in 2024. While we will continue to increase our marketing and sales investments, the top-line growth and an improving gross margin are projected to drive the bottom-line development in 2024. As we currently expect the sale of the remaining Yeezy inventory to occur at cost, the planned sale of the product is assumed to have no effect on the company’s operating profit this year.

Average operating working capital as a percentage of sales to decrease

During 2023, average operating working capital as a percentage of sales increased, reflecting the slight increase in average operating working capital against the background of lower net sales in 2023 compared to 2022. Our focus in 2024 will be on improving our average operating working capital position and returning to top-line growth. Based on this, we forecast average operating working capital as a percentage of sales to decrease to a level of between 23% and 24% in 2024.

Capital expenditure of around € 600 million

We will continue to invest into our business, but at the same time adjust our spending to the financial and operational situation of the company. Consequently, capital expenditure is expected to reach a level of around € 600 million in 2024.

Management proposes dividend payment of € 0.70 per share

The adidas AG Executive and Supervisory Boards will recommend paying a stable dividend of € 0.70 per dividend-entitled share to shareholders at the Annual General Meeting on May 16, 2024 (2023: € 0.70). This corresponds to a total payout of € 125 million in line with the prior-year level (2023: € 125 million). The proposal reflects the company’s better-than-expected performance in the transition year 2023 and its robust financial profile, as well as Management’s confident outlook for the current year. Going forward, the company plans to return to its dividend policy of paying an annual dividend to shareholders in the range of 30% to 50% of net income from continuing operations. SEE OUR SHARE

1 Source: World Bank Global Economic Prospects.