- Sportswear titan tumbles on fourth profit warning since July
- Flags potential €700 million loss for 2023
- CEO concedes business is ‘not performing the way we should’
Sportswear giant Adidas (ADS:ETR) has warned it could lose around €1.2 billion or £1.06 billion in sales in 2023 and lurch to an operating loss of up to €700 million this year, if it is unable to shift its existing stock of Yeezy sneakers.
The German trainers-to-sports apparel firm scrapped what had been a profitable partnership with controversial rapper and fashion designer Ye, formerly known as Kanye West and the face of Yeezy, in October after he made a string of anti-semitic comments.
Shares in Bavaria-based Adidas fell 11% to €139.5 on the disappointing update, which represented its fourth profit warning since July.
SIGNIFICANT ADVERSE IMPACT
Currently assessing what to do with the Yeezy inventory, Adidas said it has already accounted for the ‘significant adverse impact’ of not selling the products and warned operating profit would drop by around €500 million in 2023 if it fails to shift the stock.
Adidas, which was hit hard by last year’s fresh wave of strict Covid lockdowns in China, expects sales to decline at a high single-digit rate this year, with underlying operating profit projected to be ‘around the break-even level’.
Should it decide to write off its remaining Yeezy products, this would reduce operating profit by an additional €500 million this year.
And with Adidas also expecting to incur one-off costs of up to €200 million in 2023 as part of a strategic review aimed at ‘reigniting profitable growth as of 2024’, the company could swing from an operating profit of €669 million to an operating loss of as much as €700 million this year.
CAN ADIDAS SHINE AGAIN?
‘The numbers speak for themselves,’ conceded CEO Bjørn Gulden. ‘We are currently not performing the way we should. 2023 will be a year of transition to set the base to again be a growing and profitable company. We will put full focus on the consumer, our athletes, our retail partners and our adidas employees.’
Gulden added: ‘Together we will work on creating brand heat, improve our product engine, better serve our distribution and assure that Adidas is a great and fun place to work.
‘Adidas has all the ingredients to be successful: A great brand, great people, fantastic partners and a global infrastructure second to none. We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again. But we need some time.’
