Adidas has been used to big profits in recent years. Now the situation looks bleaker. After moderate profits in 2022, there is a risk of a loss in operating profit this year.
After the end of the collaboration with the controversial rapper Kanye West, the sporting goods manufacturer Adidas is threatened with a loss this year. The operating result could slip into the negative by up to 700 million euros if sales of Yeezy products – which were created in cooperation with West – were to be lost completely and the business had to be written off completely, Adidas announced on Thursday.
The second largest sporting goods manufacturer behind Nike terminated its collaboration with the musician and fashion designer after he repeatedly made anti-Semitic comments. The Yeezy series contributed EUR 1.2 billion in sales and EUR 500 million in operating profit. If this business ceases, the group from Herzogenaurach in Franconia expects an operating result of plus/minus zero. Should one irrevocably decide to no longer use the inventory of Yeezy products, this would entail the depreciation and reduce the result by another 500 million euros. In addition, there would be one-off costs of up to 200 million euros.
Gulden: Will need some time
“The numbers speak for themselves. We are currently not performing as well as we should,” said Adidas CEO Bjørn Gulden. 2023 will be a transition year to become a growing and profitable company again. Adidas wants to focus on consumers, athletes, retail partners and employees. The brand should be strengthened and product development and sales improved. “We have to put the pieces back together, but I’m convinced that we can make Adidas shine again. But we will need some time for that,” said Gulden.
The Norwegian came to Adidas from local rival Puma at the beginning of the year and replaced the Danish Kasper Rorsted at the head of the three-stripe group. Rorsted was accused of focusing on the once-profitable Chinese market and making other strategic mistakes. He had to correct the forecast downwards several times in the past year.
According to preliminary figures, sales at Adidas increased currency-adjusted last year by one percent to 22.5 billion euros. The operating result was 669 million euros. A year earlier there were still almost two billion euros in the books. The bottom line is that Adidas remained less: profit from continued operations fell from almost 1.5 billion to 254 million euros.
Source: Stern
