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.
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.
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.