Crisis-hit Adidas calls 2023 ‘transition’ year after Kanye West split

By Sebastian Schlenker, dpa l Wednesday, March 08, 2023

 

FRANKFURT – Adidas said this will be a “transition” year for Europe’s largest sporting goods manufacturer as the company works to dig itself out of a crisis stemming from its former alliance with rapper and designer Kanye West.

In 2023, Adidas expects currency-neutral revenues to decline at a high single-digit rate.

The German company expects to report an operating loss of €700 million ($738 million), should sales of the Yeezy products – its fashion and sneaker collaboration with West, who now goes by Ye – be completely lost.

The figure takes into account €500 million in costs from a potential Yeezy inventory write-off and up to €200 million in one-off costs. Adidas may be forced to burn the Yeezy-branded shoes, analysts say.

Adidas plans to cut its 2022 dividend to €0.70 per share from €3.30 a year ago. New Adidas boss Björn Gulden, who switched from rival Puma at the start of the year, said in a statement on Wednesday that “2023 will be a transition year to build the base for 2024 and 2025.”

“We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024,” he added in a statement as Adidas released its annual figures.

Adidas lost its lustre after ending what was a close – and lucrative – association with Ye. His string of anti-Semitic outburts eventually led to the company cutting all ties last year. The Yeezy range contributed €1.2 billion turnover and €500 million to profits in 2022.

The figures released on Wednesday confirmed preliminary estimates by the company. For the year, profit from continuing operations slumped from just under €1.5 billion to €254 million, as the crisis surrounding Ye compounded problems related to high inflation and Covid lockdowns in China.

Adidas reported a fourth-quarter net loss of €482 million, including one-off hits of around €50 million mainly related to restructuring costs. Adjusted for currency effects, Adidas posted a 1% decline in revenue in the quarter.