- The massive German sportswear company reported an operational loss of 724 million euros for the fourth quarter and a net loss of 482 million euros from ongoing operations.
- When he made several antisemitic remarks, Adidas ended its hugely lucrative association with rapper and fashion designer Ye, formerly known as Kanye West, the face of Yeezy, in October.
As a result of the costly termination of its agreement with Kanye West's Yeezy brand in October, Adidas on Wednesday revealed a significant fourth-quarter loss and reduced its dividend.
The major German sportswear company reported an operational loss of 724 million euros ($763 million) for the fourth quarter and a net loss of 482 million euros from continuing operations. At its annual general meeting on May 11, the business will propose a dividend of 70 cents per share, down from 3.30 euros per share in 2021.
Due to the business's Yeezy agreement being terminated, currency-neutral revenues decreased by 1% in the fourth quarter and will continue to do so until 2023, according to the company.
Adidas anticipates posting its first annual deficit in 31 years in 2023, with a full-year operating loss of 700 million euros. The forecast takes a knock of 200 million euros in "one-off charges" and 500 million euros in probable Yeezy inventory write-offs.
When he made a number of antisemitic remarks, Adidas ended its hugely lucrative association with rapper and fashion designer Ye, formerly known as Kanye West, the face of Yeezy, in October. If the corporation couldn't get rid of its massive unsold inventory of Yeezy shoes, revenues would take a significant hit.
According to the business, underlying operating profit will be "around break-even level," accounting for the loss of 1.2 billion euros in potential sales from Yeezy stock that was not sold.
Bjrn Gulden, the new Adidas CEO who replaced Kasper Rrsted at the beginning of the year, declared in a statement on Wednesday that 2023 will be a "transition year" as the business aims to cut back on stocks and discounts in order to achieve profitability again in 2024.
Adidas has all the necessary components for success, but Gulden insisted that the company needs to return its attention to its core constituencies—its product, customers, retail partners, and athletes.
“Motivated people and a strong adidas culture are the most important factors to build a unique adidas business model again. A business model built to focus on serving our consumer through both wholesale and DTC, that balances global direction with local needs, that is fast and agile, and of course, always invests in sports and culture to keep building credibility and brand heat.”
Throughout the whole of 2022, currency-neutral revenues were up 1% and climbed in all markets except greater China, with double-digit growth noted in North America and Latin America. Net income from ongoing activities was 254 million euros, while operating profit totaled 669 million euros.
“Inventory write-offs and one-off costs relating to the termination of its Yeezy partnership in October have cost Adidas dearly, resulting in an operating loss in the fourth quarter and a decline in sales. On top of that, sales in China fell sharply last year amid Beijing’s strict lockdown measures,” noted Victoria Scholar, head of investment at Interactive Investor.
“Plus Adidas has been dealing with increased supply chain costs post pandemic and the macroeconomic backdrop which has weakened the consumer and prompted heavy discounting to attract customers.”
During morning trade in Europe, Adidas shares decreased 1.7%, but they are still up more than 11% for the year.