- The German sportswear giant had an operating loss of 724 million euros in the fourth quarter and a net loss from continuing operations of 482 million euros.
- Adidas scrapped its highly lucrative partnership with rapper and fashion designer Ye – formerly known as Kanye West, the face of Yeezy – in October after he made a series of anti-Semitic comments.
“The numbers speak for themselves. We are currently not performing as we should”, said Adidas boss Bjørn Gulden in a press release.
Jeremy Moeller / Contributor / Getty Images
Adidas reported a big fourth-quarter loss on Wednesday and cut its dividend after the costly termination of its partnership with Kanye West’s Yeezy brand in October.
The German sportswear giant posted a fourth-quarter operating loss of 724 million euros ($763 million) and a net loss from continuing operations of 482 million euros. The company will recommend a dividend of 70 euro cents per share at its annual general meeting on May 11, down from 3.30 euros per share in 2021.
Currency-neutral revenue fell 1% in the fourth quarter as a result of the termination of the company’s Yeezy partnership and will decline at a high single-digit rate in 2023, the company said.
Adidas forecasts a full-year operating loss of €700m in 2023, marking its first annual loss in 31 years. The estimate includes a €500 million hit in potential Yeezy inventory write-offs and €200 million in “one-off” costs.
Adidas scrapped its highly lucrative partnership with rapper and fashion designer Ye – formerly known as Kanye West, the face of Yeezy – in October, after he made a series of anti-Semitic comments. The company had previously reported a severe hit to earnings if it was unable to move its huge remaining inventory of unsold Yeezy footwear.
The company said underlying operating profit will be “around break-even level”, reflecting the loss of 1.2 billion euros in potential sales from unsold Yeezy shares.
New Adidas boss Bjørn Gulden, who took over from Kasper Rørsted at the turn of the year, said in a statement on Wednesday that 2023 will be a “year of transition” as the company looks to reduce inventory and reduce discounts to return to profitability. in 2024.
“Adidas has all the ingredients to succeed, but we need to put our focus back on our core: product, consumers, retail partners and athletes,” said Gulden.
“Motivated people and a strong adidas culture are the most important factors in building a unique adidas business model again. A business model built to focus on serving our consumers through both wholesale and DTC, balancing global direction with local needs, which is fast and agile, and of course always investing in sport and culture to continue building credibility and brand.”
For full 2022, currency-neutral revenue increased 1% and grew in all markets except Greater China, with double-digit increases observed in North America and Latin America. Operating profit came to 669 million euros, while net income from continuing operations was 254 million euros.
“Inventory write-downs and one-time costs related to the end of the Yeezy collaboration 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 in the middle of Beijing’s strict lockdown measures,” noted Victoria Scholar, chief investment officer at Interactive Investor.
“Additionally, Adidas has dealt with increased supply chain costs following the pandemic and the macroeconomic backdrop that has weakened the consumer and led to deep discounting to attract customers.”
Adidas shares fell 1.7% in morning trading in Europe, but are still up more than 11% from a year ago.