adidas (XETR: ADS.DE) announced its 2023 Q2 financial results on August 3, 2023. According to the announcement, net sales were down 4.5% (YoY, 3 months). In addition, cost of sales was down 5.6%. The company recorded gross margin as 50.9% (3 months; up 0.6 pp, YoY).
Moreover, operating profit was down 55.0% and net income was down 69.3% (3 months, YoY). Furthermore, operating margin was recorded as 3.3% (3 months; down 3.7 pp, YoY).
Looking at sales geographically, Latin America showed the highest growth of up 29.8% (YoY, 3 months). This was followed by Greater China of up 16.4%.
On the other hand, North America experienced the biggest slowdown of down 16.4%. This was followed by EMEA of down 0.8%.
As for the company’s financial trends, the current ratio was recorded as 127.8%, while the quick ratio was 64.3% (3 months). In this regard, the company reported that inventory was up 22.0% (YoY, 3 months). These figures indicate the presence of a noticeable backlog of inventory.
Net cash generated from operating activities was recorded as a cash inflow of 460 million EUR (6 months). It was cash outflow of 464 million EUR in 2022 Q2. Free cash flow was down 10.6% (YoY, 3 months).
It could be evaluated that adidas faces financial risks such as deteriorating profit margins and increasing inventory. In addition, recent slowdown of the Chinese economy is also a major risk factor. We have to monitor the company’s business performance so as to continue the investment.
- Watanabe & Brothers’ Investment is holding shares of adidas AG.
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