Significant drop in sales expected
Adidas gives dreary balance sheet outlook
2/9/2023, 8:44 p.m
Anti-Semitic remarks end rapper Kanye West’s partnership with Adidas in 2022. The financial losses will continue into the current financial year. The sporting goods giant does not rule out a drop in sales. There is a risk of a loss of several million euros.
The sporting goods group Adidas looks cautiously into the new year. The DAX group from Herzogenaurach expects a decline in currency-adjusted sales in the high single-digit percentage range in 2023. The underlying operating result should be around break-even level, announced Adidas AG. The financial forecast already takes into account the negative impact if the inventory of products from the Yeezy collection from the collaboration with rapper/designer Ye (previously Kanye West) is not sold.
“The numbers speak for themselves. We are currently not performing as well as we should,” said CEO Björn Gulden, according to the announcement. “2023 will be a transition year to lay the foundation to become a growing and profitable company again.”
The company continues to evaluate various options for future use of its inventory of Yeezy products. However, should Adidas irrevocably decide not to use them, this would result in the write-off of the Yeezy inventory. This would reduce the company’s operating profit by another 500 million euros this year. Adidas ended its long-term collaboration with the US rapper, among other things because of anti-Semitic statements, but has so far left open what will happen to the “Yeezy” products that have been produced but not yet sold.
Furthermore, Adidas expects one-off costs of up to 200 million euros for 2023. These costs are part of a strategic review the company is currently undertaking to return to a profitable growth path from 2024 onwards.
In 2022, based on preliminary unaudited figures, Adidas had sales of 22.51 billion euros, an increase of 6 percent. Currency-adjusted revenue increased 1 percent. The gross margin fell from 50.7 percent to 47.3 percent. The operating result meanwhile collapsed from almost 2 billion euros to 669 million euros, which corresponds to an operating margin of 3.0 percent (previous year: 9.4 percent). The profit from continuing operations in 2022 was 254 million after 1.492 billion euros, as Adidas further announced.