Kanye West

Yeezy fiasco helps push Adidas into loss as US sales continue to fall

Author: Editors Desk Source: CNN:::

March 13, 2024 at 10:45

Adidas Yeezy trainers inside the Presented By sneaker resale store in London, pictured in August 2021. Hollie Adams/Bloomberg via Getty Images

London (CNN) — Adidas has slumped to a rare annual loss, hit by the fallout from its costly break-up with rapper Ye, falling sales in North America and a huge tax bill.

The German sportswear giant posted a net loss of €58 million ($63 million) in its core business in 2023, as revenue was hurt by lower sales of Yeezy-branded clothing and sneakers, while its tax burden shot up.

“We didn’t have a great year in 2023,” chief financial officer Harm Ohlmeyer told journalists Wednesday.

Shares in Adidas (ADDDF) fell almost 4% in early trade, before paring most of those losses by 9.40 a.m. ET.

In October 2022, Adidas broke off its high-profile partnership with Yeezy designer Ye, the rapper formerly known as Kanye West, after he made a string of anti-semitic remarks.

Adidas has been selling its remaining Yeezy stock, saying it will donate a “significant amount to selected organizations working to combat discrimination and hate, including racism and antisemitism.”

The 2023 tax burden, meanwhile, was higher than in the previous year but the company expects that pressure on earnings to ease in the future.

“Going forward, the company expects the tax rate to normalize again as its operating profit improves,” Adidas said in a statement.

Sales in North America — the company’s second-biggest market — declined more than 16% in 2023, partly because Adidas slashed sales to wholesalers in order to reduce their high levels of inventory. The company expects its sales in the region to fall again this year, by around 5%.

“All European brands have a difficult time in the US compared to the American brands,” company CEO Bjørn Gulden told journalists. He added that Adidas needed to invest more in sports such as baseball and basketball to build its reputation among American consumers.

Elsewhere, the company’s fortunes are looking up. Sales in China, its third-biggest market, rose more than 8% last year, soaring nearly 37% in the final three months of 2023 compared with the same period in 2022. And it expects double-digit growth in the country this year.

Globally, sales of Adidas footwear, which includes popular Samba and Gazelle sneakers, were up 4%, in contrast with a 6% fall for Adidas apparel.

On a different measure of earnings, the company recorded an operating profit of €268 million ($293 million) last year. This was still down almost 60% from 2022.

Olesya Dmitracova contributed to this article.