Adidas on Wednesday reported a big fourth- quarter loss and slashed its dividend after the expensive termination of its affiliation with Kanye West’s Yeezy brand in October.
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 recommend a dividend of 70 euro cents per share at its May 11 yearly general meeting, down from 3.30 euros per share in 2021.
Currency-neutral earnings declined by 1 in the fourth quarter as a result of the termination of the company’s Yeezy affiliation and will decline at a high-single-figure rate across 2023, the company said.
READ MORE: The Sport Minister Felicitate With The Flying Eagles For Securing World Cup Ticket
Adidas is projecting a full-cycle operating loss of 700 million euros in 2023, marking its first periodic loss for 31 years. The estimate includes a megahit of 500 million euros in potential Yeezy fund write-off and 200 million euros in “one- off costs.
Adidas scrapped its big-time economic affiliation with rapper and fashion designer Ye — formerly known as Kanye West, the visage of Yeezy — in October, after he made a series of antisemitic commentary. The company had previously flagged a severe megahit to revenues, if it were incompetent to shift its huge remaining stock of unsold Yeezy footwear.
The company said supporting operating profit will be “around break-even position,” reflecting the loss of 1.2 billion euros in potential transactions from unsold Yeezy stock.
New Adidas CEO Bjørn Gulden, who took over from Kasper Rørsted at the turn of the year, said in a statement Wednesday that 2023 will be a “transition year,” as the company looks to reduce inventories and lower deductions in order to return to profitability in 2024.
Adidas has all the components to be successful, but we need to put our focus back on our core product, consumers, retail partners, and athletes,” Gulden said.
Motivated people and a strong adidas culture are the most important factors to raise a unique adidas business model again. A business model erected to concentrate on serving our consumer through both wholesale and DTC, that balances global direction with local conditions, that’s fast and agile, and of course, always invests in sports and culture to keep building credibility and brand heat.
Over the total of 2022, currency-neutral earnings were over 1% and grew in all requests except greater China, with double-number increases observed in North America and Latin America. Operating profit came in at 669 million euros, while net income from continuing operations was 254 million euros.
Inventory write-offs and one-off costs relating to the termination of its Yeezy affiliation in October have bring Adidas dearly, affecting in an operating loss in the fourth quarter and a decline in sales. On top of that, sales in China fell sharply last year amid Beijing’s strict lockdown measures,” noted Victoria Scholar, head of investment at Interactive Investor.
Plus Adidas has been dealing with increased supply chain costs post pandemic and the macroeconomic background which has weakened the consumer and urged heavy discounting to attract clients.
Adidas shares were down 1.7% during morning trade in Europe, but remain up more than 11% on the year.
