On Wednesday, Adidas announced its first loss in over thirty years, attributing it to fallout from ending its collaboration with Kanye West. Despite this setback, the company claimed it was beginning to recover.
In late 2022, the German sportswear giant terminated its contract with the US rapper, now formally known as Ye, following backlash from a series of anti-Semitic social media posts.
Adidas and West had jointly created the successful line of Yeezy trainers. The breakdown of their partnership deprived the company of a crucial source of revenue and left it burdened with a surplus of unsold footwear.
Adidas reported its first loss in over 30 years on Wednesday due to fallout from ending its collaboration with Kanye West. However, the company expressed optimism about its turnaround efforts.
In late 2022, Adidas terminated its contract with the US rapper, now formally known as Ye, following backlash from a series of anti-Semitic social media posts.
Adidas and West had jointly designed the successful line of Yeezy trainers. The dissolution of their partnership deprived the company of a crucial revenue stream and left it burdened with a significant surplus of unsold footwear.
Adidas incurred a loss of 75 million euros ($82 million) in 2023, compared to a profit of 612 million euros the previous year. This marked the company’s first net loss since 1992, according to Adidas.
Despite the setback, CEO Bjorn Gulden, who took over shortly after the West collaboration ended, remained positive. He acknowledged that turning the business around would take time but expressed confidence in meeting their promises.
Gulden emphasized that while the 2023 results were disappointing, they were not as dire as initially feared. He outlined a plan for improvement, aiming for significant progress by 2025 and a healthy state by 2026.
Year of change
Revenues declined by five percent to 21.4 billion euros, mainly due to the halt in Yeezy trainer sales, particularly affecting the US market.
Adidas has been gradually phasing out Yeezy trainers, generating 750 million euros from two sales in 2023, compared to 1.2 billion euros in 2022.
Anticipating the completion of Yeezy sales this year at cost, the company foresees revenues of approximately 250 million euros.
While North American sales dropped significantly and are expected to continue declining, there was a strong rebound in China, a positive development in a key market affected by COVID-19 restrictions.
CEO Gulden emphasized the promotion of classic Adidas trainers like Samba, Gazelle, and Campus, with sales of these products showing healthy growth.
Adidas predicts a business uptick in 2024, anticipating sales growth in the mid single-digit range and an operating profit doubling to around 500 million euros compared to 2023.
With Germany hosting the European football championships and Paris hosting the Olympics, Adidas expects additional sales from jerseys and related merchandise.
However, the company’s forecast fell short of analysts’ expectations by several hundred million euros, disappointing some observers who saw it as lackluster.
Despite this, Adidas shares rose about four percent in late afternoon trading.
Deutsche Bank noted that the results were as expected and deemed 2024 as another “transition year” for the company, with focus on future growth strategies.”
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