“The numbers speak for themselves. We are not currently performing as well as we should,” Adidas CEO Bjorn Gulden said in a press release.
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Adidas reported a big fourth-quarter loss on Wednesday and cut its dividend in October after its partnership with Kanye West’s Yeezy brand proved costly.
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 propose 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 revenues fell 1% in the fourth quarter and will decline at a high-single-digit rate in 2023 as a result of the company’s Yeezy partnership termination, the company said.
Adidas is forecasting a full-year operating loss of 700 million euros in 2023, marking its first annual loss in 31 years. The report includes a €500m potential Yeezy stock write-off and €200m in “one-off costs”.
Adidas ended its highly successful partnership with rapper and fashion designer Yemen (with Kanye West, formerly known as the face of Yeezy) in October after anti-Semitic comments. The company previously claimed that revenues would be hit hard if it could not replace the remaining large inventory of unsold Yeezy shoes.
The company said underlying operating income would be “around break-even,” reflecting a loss of €1.2 billion in potential sales from unsold Yeezy stock.
New Adidas CEO Bjorn Gulden, who took over from Kasper Rorsted at the start of the year, said in a statement on Wednesday that 2023 will be a “transition year” as the company tries to cut inventory and reduce discounts to return to profitability. in 2024.
“Adidas has all the ingredients for success, but we need to focus on our core: product, customers, retail partners and athletes,” Gulden said.
“Motivated people and a strong adidas culture are the most important factors in rebuilding the unique adidas business model. The business model, which focuses on serving our customers through wholesale and DTC, balances global focus with local needs, which is fast and agile. flexible and, of course, reliability and brand warmth will always invest in sports and culture to save.”
For the full year 2022, currency-neutral revenues were up 1% and increased in all markets except China, with double-digit growth in North America and Latin America. Operating profit was 669 million euros, and net income from continuing operations was 254 million euros.
“Inventory write-offs and one-time costs related to the termination of the Yeezy partnership in October cost Adidas dearly, leading to an operating loss and lower sales in the fourth quarter. In addition, sales in China fell sharply last year amid Beijing’s strict lockdown measures.” , said Victoria Skoler, head of investment department of Interactive Investor.
“Plus Adidas has been dealing with rising supply chain costs post-pandemic and a macroeconomic environment that has weakened the consumer and created huge discounts to attract customers.”
Shares of Adidas were down 1.7% in morning European trading, but are up more than 11% for the year.
