Adidas updates 2023 guidance to reflect potential Yeezy stock write-off
Adidas is warning of a significant impact to its financial results for 2023 following the write-off of existing Yeezy stock.
Adidas terminated its partnership with Ye, formerly known as Kanye West, after the American rapper and designer made a series of offensive and antisemitic comments.
Should the company decide not to sell or repurpose excess Yeezy stock, revenues would suffer by approximately £1.06 billion (€1.2 billion) and operating profit by approximately £441 million (€500 million) this year.
If the decision materialised, the sportswear giant would expect to see an operating loss of £618 million (€700 million) in 2023.
The company expects currency-neutral sales to decline at a high-single-digit rate in 2023 and the underlying operating profit is projected to be around the break-even level. In addition, Adidas expects one-off costs of up to £196 million (€200 million) in 2023 as part of a strategic review.
CEO, Bjørn Gulden, commented: "The numbers speak for themselves. We are currently not performing the way we should."
"2023 will be a year of transition to set the base to again be a growing and profitable company. We will put full focus on the consumer, our athletes, our retail partners and our Adidas employees. Together we will work on creating brand heat, improve our product engine, better serve our distribution and assure that Adidas is a great and fun place to work.
"We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again. But we need some time.”
In 2022, Adidas revenues increased by 1% in currency-neutral terms. Sales were up 6% to £19.87 billion during the 12-month period. The company generated an operating profit of £591 million last year, reflecting an operating margin of 3%.
This follows the news that Adidas will launch a new category called ‘Sportswear’ “to occupy the space between the brand’s well-known Performance and Originals labels”, its first new label for 50 years.