Kanye West is causing trouble
Adidas stock plummets
02/10/2023 10:31 am
Adidas is probably stuck with huge stocks of its “Yeezy” collection. That could result in depreciation of several hundred million euros for the group. The stock is going down.
The separation from the scandalous rapper Kanye West will probably put the sporting goods group Adidas in the red in the current year. On the Frankfurt Stock Exchange, shares have collapsed by more than eight percent and are thus heading for the blackest trading day since the beginning of the corona pandemic in March 2020.
In the worst case, an operating loss of 700 million euros can be expected in 2023, in the best case a black zero, the number two in the world market for sports shoes and clothing announced on Thursday evening. The main reason: Adidas ended its collaboration with West last year after he had repeatedly attracted attention with verbal abuse and anti-Semitic statements. Adidas imposed a sales stop for the “Yeezy” brand designed by the rapper, which had brought billions in sales and high margins for years.
This means that the company is missing 1.2 billion euros in sales and an operating profit of 500 million euros in the new year. Customers paid several hundred euros each for “Yeezy” shoes and clothing. The end of the partnership had already cost Adidas 250 million euros in profit in the Christmas business. Adidas has so far left open what will happen to the inventory that has already been produced but taken off the shelves. If it is no longer sold, it would have to be written off by 500 million euros, according to the group.
“Adidas has had multiple social media fails,” commented one retailer. In a highly volatile, mood-driven market, you have made yourself dependent on one person for the long term and are now suffering the consequences.
“Will take some time”
The abrupt separation from the American scandal rapper Kanye West is likely to put Adidas in the red.
(Photo: picture alliance / ASSOCIATED PRESS)
Overall, Adidas is preparing for a drop in sales of up to nine percent in the current year. That would be around two billion euros less than in 2022. Last year, currency-adjusted group sales increased by one percent to 22.5 billion euros. However, the operating profit collapsed by more than two thirds to 669 million euros. The bottom line is that only 254 million euros remained in 2022. For the current year, analysts had previously expected profits in the billions – but nothing will come of it.
The new CEO Björn Gulden, who changed from Puma at the beginning of the year, described 2023 as a “year of transition”. “We’re not performing as well as we should at the moment,” said the manager. His predecessor Kasper Rorsted came under increasing pressure in the summer and left early at the end of the year.
The guilder, which received advance praise on the stock exchange, now wants to spend up to 200 million euros so that Adidas can grow profitably again from 2024. “We have to put the pieces back together, but I’m convinced that we can make Adidas shine again,” said Gulden. “But we will need some time for that.”