Adidas has warned that the termination of its contract with rapper and fashion designer, Kanye West, will greatly impact its profits. This is due to the company’s struggles to sell the remaining Yeezy shoe stock following the anti-Semitic comments made by West in October 2022.
On Thursday, February 9th, the German company stated that the impact of not selling the remaining Yeezy stock will cause sales to decline at a high single-digit rate in currency-neutral terms. This is according to a report in the Wall Street Journal.
Adidas predicted that this would lead to a loss of 500 million euros in operating profit and a decline in overall revenues by 1.2 billion euros.
The company is still assessing whether it will be allowed to sell the remaining Yeezy stock by repurposing them under a different brand. If this is not possible, it will result in a 700 million euro operating loss this year, with a reduction of 500 million euros in operating profit and 200 million euros in one-off costs.
The new CEO of Adidas, Bjorn Gulden, who recently joined the company after departing from its local rival Puma, commented on the situation;
“The numbers speak for themselves. We are currently not performing the way we should.”
However, he claimed that Adidas would eventually get back on track, even though 2023 would be a year of transition for the business.
Apart from the consequences of the split with West, Adidas is also battling a tricky Chinese market, following Beijing’s strict zero COVID measures.
It has also been struggling with the below-par sales of its partnership with Beyonce. In March 2022, the sportswear brand, which was one of many international companies to leave Russia in the aftermath of the invasion of Ukraine, decided to close its stores there and cease operations for its online store.
Adidas on Thursday also released its preliminary financial results for 2022. Based on the report, operating profit was recorded at 669 million euros, down two-thirds from 2021, while revenue increased by 6 percent to 22.5 billion euros. Net income from continuing operations dropped from 1.49 billion in 2021 to 254 million euros. Adidas is expected to release its official 2022 results next month.