Adidas third-quarter profit margin grows as inventories shrink

Adidas on Wednesday cut its inventory levels more than expected in the third quarter as the sportswear giant sold fewer products to wholesalers, while lower costs helped increase its gross margin.

Adidas on Wednesday cut its inventory levels more than expected in the third quarter as the sportswear giant sold fewer products to wholesalers, while lower costs helped increase its gross margin. Inventory levels were down 23% year-on-year at 4.85 billion euros ($5.18 billion), a little more than expected, Adidas said.

Apparel and footwear retailers in the U.S. and elsewhere are overstocked and slashing prices to help move products off the shelves. Adidas last month lifted its full-year outlook, partly due to the positive impact of the release of Yeezy shoes during the second and third quarter.

Adidas' gross margin for the quarter was up 0.2 percentage points at 49.3%, supported by reduced freight costs and fewer discounts. Currency-adjusted sales in North America fell 8.8%, while sales in EMEA grew just nearly 2% and Greater China saw a 5.7% jump.

U.S. retailers have been particularly struggling with excess stocks of apparel and footwear. Sales in North America were dented by reduced sales to wholesalers there, Adidas said, adding that high inventory levels in the U.S. would continue to impact its business "for a while".

Footwear revenue grew 6% over the reported quarter while apparel sales declined by 6%, a trend seen across the sportswear industry as shoppers prioritise more essential purchases. ($1 = 0.9359 euros)