The termination of the partnership with the controversial rapper Kanye West will also weigh on Adidas in the current year. Although the company continues to examine various options for the future use of its portfolio of Yeezy products resulting from the partnership, a significant negative effect can be expected if there is no sale, the company announced on Thursday in Herzogenaurach. This would reduce sales by around 1.2 billion euros in 2023 and the operating result by around 500 million euros.
Adidas expects currency-neutral sales to decline
Against this background, Adidas expects currency-adjusted sales to decline in the high single-digit percentage range in the current year, it said. The company also expects operating income to be close to break-even. If Adidas decides to stop using Yeezy products at all, the inventory will have to be written off. That would then lead to a minus in the operating result of a total of 700 million euros, it said.
Investors were appalled. On the Tradegate trading platform, the Adidas share lost eleven percent to 139 euros compared to the end of the main Xetra transaction. With that, the stock gave back some of the recent recovery gains. At the end of 2022, the Adidas titles had slipped to a multi-year low of around 93 euros in the wake of the last profit and sales warning last November. The appointment of the new CEO Björn Gulden triggered a countermovement within which the price had recovered to more than 160 euros.
Gulden: 2023 will be a year of transition
“The numbers speak for themselves. We’re not performing as well as we should at the moment,” said Gulden, who only took over the helm from Kasper Rorsted at the beginning of the year. “2023 will be a transition year to lay the foundation to become a growing and profitable company again.”
Gulden, who switched from local rival Puma to Adidas, wants to subject the group to a strategic review in order to return to a profitable growth path from 2024. The company expects one-off costs of 200 million euros for this in 2023. Gulden wants to strengthen the brand again and improve product development and sales. “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.”
Last year, Adidas struggled with high inflation and problems in China. In addition, the cooperation with Kanye West was terminated, among other things, because of anti-Semitism allegations against the rapper. According to the preliminary figures published on Thursday, sales rose by six percent to 22.5 billion euros, with currency-adjusted growth of one percent. With that, Adidas just managed the lower end of the growth forecast, which has been lowered several times.
The gross margin, which has received much attention from analysts, fell from 50.7 to 47.3 percent, as Adidas further announced. The operating result collapsed to 669 million euros, after almost two billion euros in the previous year. The bottom line was a profit from continuing operations of 256 million euros. In 2021, Adidas had still achieved around 1.5 billion euros. Adidas had also lowered its profit forecast several times in the past year. Here the group reached the value last promised. (dpa)