© Reuters.
By Scott Kanowsky
Investing.com — Shares in Adidas AG (ETR:) shed more than a tenth of their value in early European trading on Friday, after the sportswear group warned that its dispute with rapper Ye may cause a steep loss in 2023.
In a statement, the company flagged that if it decides not to repurpose any of its “Yeezy” branded products going forward, the remaining unsold inventory will be written off, lowering operating profit by €500 million (€1 = $1.0741) and revenue by around €1.2 billion in its current financial year.
The Yeezy line of clothing had previously provided a solid source of sales for the sneaker manufacturer. But Adidas ended its partnership with Ye, the performer formerly known as Kanye West, in October after he made a series of controversial remarks.
Meanwhile, the Germany-based firm said it expects to be hit by one-off costs of up to €200M as part of a wider review of its operations.
As a result, Adidas predicted it could now report an annual operating loss of €700M, while currency-neutral sales are seen declining at a high-single-digit rate this year. On an underlying basis, operating profit is forecast to be “around the break-even level.”
“The numbers speak for themselves. We are currently not performing the way we should,” said Adidas chief executive officer Bjørn Gulden, who replaced Kasper Rørsted at the helm of the business last month. “2023 will be a year of transition to set the base to again be a growing and profitable company.”
Analysts at Baader described Adidas’ latest profit warning – Adidas’ fourth since July – as “horrible” and “much deeper than anyone projected.”
For the 2022 fiscal period, preliminary revenue rose by 1% in currency-neutral terms to €22.5B, missing expectations. Operating profit also dropped to €669M.
Adidas will unveil its final 2022 results on March 8.
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