Beyond Yeezy, the German company said currency-neutral sales increased 2% in the quarter for the rest of its offerings, driven by classic sneakers like the Samba and Gazelle. That’s increasing brand heat around the world and creating higher interest from retailers for next year, according to a statement.

“Our current performance is not good enough, but we have said from the beginning that we need time to build this fantastic brand and company back to where it belongs: At the top as the best sports brand in the world,” Chief Executive Officer Bjorn Gulden said.

Shares fell about 1.5% in early Frankfurt trading, erasing initial gains. The stock has climbed by a third this year, compared with a 1% decline in arch-rival Puma SE.

Investors are increasingly looking at Adidas’s progress on the non-Yeezy front as a sign of how successful Gulden’s turnaround efforts have been. 

The new CEO has pledged to make the company much faster at jumping on trends and has scaled up production of the Terrace line of sneakers, which include the Sambas, Gazelles and Spezials. That’s created fresh momentum in Adidas’s Originals franchise, coinciding with a new ad campaign that launched in September for the retro products. Demand continues to outstrip supply for the Terrace shoes, the company said.

High Inventories

Adidas is still contending with high levels of unsold goods, especially in the US, which will “continue to impact our business for a while,” Gulden said. Even so, inventories fell by 23% in the quarter to €4.85 billion — slightly ahead of expectations, he said.

“Progress on inventory levels seems to be running slightly ahead of plan which is the critical new news today,” said James Grzinic, an analyst at Jefferies. The update also confirmed that the Adidas Terrace range is an especially important driver of sales, he said.

The US remains the company’s biggest challenge on the sales front. Adidas has slowed down its efforts to supply the world’s largest sports market with products, leading to revenue dropping by 9% in the quarter across North America.

Elsewhere, the picture is brighter. Sales at constant currencies rose almost 6% in Greater China, once a growth engine that’s struggled in recent years, and increased slightly faster across the rest of Asia-Pacific. Latin America expanded by 13% while EMEA gained about 2%, the company said.

Adidas has raised about €750 million selling Yeezy products in two different drops since May.

The potential write-off of the remaining Yeezy inventory is now around €300 million, it said. 

The company canceled the Yeezy collaboration last October following a string of antisemitic rhetoric from Ye, formerly known as Kanye West.

Adidas confirmed its updated guidance from October of an expected operating loss of about €100 million in 2023.