What once seemed like a good idea, is now causing Adidas some serious regrets. The alliance with controversial rapper Ye/Kanye West ended prematurely, leaving the trainer manufacturer with more than a billion euros in unsalable stock.
Certain loss
After Adidas showed Ye the door after his anti-Semitic and racist statements, it is left with a mountain of unsalable stock. The company is looking for a solution, but warns that it will lose around 1.2 billion euros in sales this year by removing Yeezy (Ye’s brand) from its shelves. As a result, its operating profit will also fall by half a billion euros. If the sports manufacturer soon has to write off all this stock – as in: have it destroyed – that much more in lost profits will be added.
As a result, 2023 will be a ending in a huge loss, that much is already clear. Adidas expects a sales loss between 3 and 5 % and an underlying profit around zero. As the ailing trainer maker is also in the middle of a reorganisation, there will also be up to 200 million euros in one-off costs this year. In the worst-case scenario, Adidas is counting on an operating loss of 700 million euros for the full financial year.
Transitional year
The setback comes on top of last year’s result, which were not a major success either: in its preliminary annual figures, Adidas mentions a 1 % sales growth excluding currency effects. Sales clocked in at 22.5 billion euros, with a gross margin of 47.3 %. However, net profit plunged from 1.5 billion to 254 million euros.
CEO Bjørn Gulden admits that his company is not reaching expectations at the moment. He says 2023 will be a transitional year, hoping to return to profitable growth from 2024. He is convinced that the label has all the ingredients to be successful, but that recovering from such a setback requires time.
