- The German sportswear giant posted an operating loss of 724 million euros in the fourth quarter and a net loss from continuing operations of 482 million euros.
- Adidas ended 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 operating as we should,” Adidas CEO Bjørn Gulden said in a press release.
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Adidas announced 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 reported 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, up from 3.30 euros per share in 2021.
Currency-neutral revenue fell 1% in the fourth quarter following the termination of the company’s Yeezy partnership and will decline in high single digits in 2023, the company said.
Adidas forecast a full-year operating loss of 700 million euros in 2023, marking its first annual loss in 31 years. The estimate includes a €500 million hit in potential inventory write-offs from Yeezy and €200 million in “one-time costs”.
Adidas ended 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 previously reported a hit to revenue if it was unable to move its huge remaining inventory of unsold Yeezy shoes.
The company said underlying operating profit would be “around break-even,” reflecting the loss of 1.2 billion euros in potential sales of unsold Yeezy stock.
New Adidas CEO Bjørn Gulden, who took over from Kasper Rørsted earlier this year, said in a statement on Wednesday that 2023 would be a “year of transition” as the company seeks to reduce inventory and discounts in order to return to profitability. in 2024.
“Adidas has all the ingredients to succeed, but we need to refocus on our core business: the product, the consumers, the business partners and the athletes,” Gulden said.
“Driven people and a strong adidas culture are the most important factors in rebuilding a unique adidas business model. A business model designed to focus on customer service through wholesale and DTC, which balances global orientation with local needs, which is fast and nimble, and of course always invests in sports and culture to continue building brand credibility and warmth.”
Full-year 2022, currency-neutral revenue grew 1% and grew in all markets except Greater China, with double-digit increases seen in North America and America Latin. Operating income amounted to 669 million euros, while net income from continuing operations reached 254 million euros.
“Inventory write-offs and one-time costs related to the termination of its partnership with Yeezy in October cost Adidas dearly, resulting in a fourth quarter operating loss and lower sales. plummeted last year amid Beijing’s strict lockdown measures,” noted Victoria Scholar, chief investment officer at Interactive Investor.
“Additionally, Adidas has had to contend with rising supply chain costs post-pandemic and the macroeconomic backdrop that has weakened the consumer and prompted steep discounts to attract customers.”
Shares of Adidas were down 1.7% during the morning session in Europe, but remain up more than 11% on the year.