German group warns it may take a hit of up to €700mn as new CEO says it needs to ‘put pieces back together’
Adidas has warned it may face an operating loss of up to €700mn this year after its ill-fated tie-up with Kanye West left the group with unsold Yeezy sneakers, sending shares in the sportswear maker sliding on Friday.
The German group issued its fourth profit warning since July on Thursday after markets had closed, laying out a worst-case scenario in which it would have to write off all the remaining inventory.
The tie-up with West had proved highly profitable for Adidas but the company ditched it in October after the rapper and fashion designer caused an international outcry with antisemitic remarks.
In his first public comments since taking over as chief executive last month, Bjørn Gulden said the company needed time to “put the pieces back together”.
“The numbers speak for themselves. We are currently not performing the way we should,” said Gulden, who joined from Adidas’s local rival Puma after his predecessor Kasper Rørsted was ousted over a series of profit warnings last summer.
Adidas said late on Thursday that it was likely to lose about €1.2bn in annual sales and €500mn in operating profit this year following the decision to sever ties with West. An internal review into what to do with unsold Yeezy kit was ongoing, the group said.
Citi analysts called the profit warning “material” and akin to a “reset”.
Shares in Adidas fell as much as 10 per cent in early trading on Friday.
The group has been hit not just by the Yeezy debacle but also by its decision to quit Russia and its travails in the Chinese market.
Gulden said “2023 will be a year of transition to set the base to again be a growing and profitable company”, adding that he wanted to “improve our product engine, better serve our distribution and assure that Adidas is a great and fun place to work”.
Based on unaudited numbers, sales in 2022 rose 1 per cent adjusted for currency swings to €22.5bn, about €300mn below analysts’ expectations, according to a consensus survey published by the company. Operating profit fell by two-thirds to €669mn.
Adidas will report detailed results for last year on March 8.