Adidas says loss may hit $997 million if Yeezy shoes unsold

Sportswear group Adidas terminated its lucrative design partnership with Ye in late October 2022. PHOTO: AFP

MUNICH – Adidas said it may report an operating loss of €700 million (S$997 million) in 2023 as it continues to deal with the fallout of the dispute with rapper and former partner Ye. 

The German sneaker brand said that if it has to write off all existing Yeezy inventory, it could report such a loss in 2023.

It had previously flagged that its profit and revenue have been hurt by the damage from ending the lucrative line. 

New chief executive officer Bjorn Gulden is looking to inject a fresh era of creativity and optimism into a brand beset by crises on several fronts.

He is conducting a strategic review aimed at “reigniting profitable growth” by 2024 that could cost as much as €200 million in 2023. 

Sales will sink at a high single-digit rate in 2023, the German company forecast late on Thursday. That compares with the roughly 4 per cent growth that analysts were estimating.

Mr Gulden started at Adidas in January 2023 after nearly a decade running cross-town rival Puma, where he led a turnaround that also began with him resetting profit and sales growth expectations.

His main focus at Adidas will be reinvigorating the brand’s lacklustre pipeline of sneakers and apparel and winning back customers in the United States, Europe and China.

He will also have to figure out if Adidas can sell or repurpose Yeezy designs to customers without the brand name. 

The sportswear group terminated its lucrative design partnership with Ye, formerly known as Kanye West, in late October 2022 after he made a series of anti-Semitic and racist remarks.

Adidas had become heavily dependent on the Yeezy line, which it dubbed one of the most successful in the industry’s history, and it took weeks of deliberations inside the company before it finally terminated the partnership.

Other retailers such as Gap moved much quicker to sever ties. 

Adidas is also still facing challenges in China, where demand for its shoes and clothing has fallen amid a consumer boycott and as a result of Covid-19 restrictions. 

The weak full-year results and muted sales guidance for 2023 mean the new leadership must improve execution and brand health, said Ms Poonam Goyal, a Bloomberg Intelligence senior industry analyst. 

“The sales guidance is more than just the €1.2 billion in lost Yeezy sales, we believe. It reflects a struggle to draw sales and stanch market-share loss, despite a rise in demand for athleisure worldwide,” she added. 

Adidas’ American depositary receipts fell as much as 9.5 per cent, the most intraday in almost three years. BLOOMBERG

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