The sporting goods company Adidas is in a crisis like it hasn’t been in a long time. The abrupt end of the collaboration with the US rapper Kanye West, who was controversial because of anti-Semitic outbursts and expressions of sympathy for Adolf Hitler, made the company from Herzogenaurach in Franconia cost more economically. The sporting goods manufacturer from the Franconian town of Herzogenaurach, number two in the industry after the US giant Nike, has been weakening for a number of reasons for a long time.
The statement, released by Adidas on Thursday evening after the close of trading, thwarts the glowing images of Argentina’s victory in Adidas jerseys and shorts at December’s World Cup in Qatar. And it shows how dependent Adidas was on working with Kanye West, who now calls himself Ye. After the rapper’s “unacceptable, hateful and dangerous” statements, the company ended its collaboration with him in October 2022. As a result, the largest European sporting goods manufacturer expects a negative operating result of up to 700 million euros for 2023. Sales are expected to fall by 1.2 billion euros. Those are devastating numbers compared to the competition in the high-growth sporting goods industry.
Rapper Kanye West now only calls himself Ye.
(Photo: JEAN-BAPTISTE LACROIX/AFP)
But something hasn’t been right at Adidas for a long time, it’s not for nothing that CEO Kasper Rorsted had to leave at the end of 2022. It failed to stop massive sales slumps in the Chinese market, which is very important for the three-stripe brand. Added to this were full camps, internal unrest because of Rorsted’s management style and a weak share price. Adidas had to correct its sales and profit forecasts downwards three times in 2022. Rorsted’s successor Björn Gulden, who switched from rivals Puma to Adidas, is now sweeping up the pieces of his predecessor. His advantage: He doesn’t have to continue writing a brilliant success story, which experience has shown is difficult. He starts at a low level and if he wins he can inspire with a growth story.
In the past year, the business of the successful company was miserable. According to preliminary figures, sales increased by only one percent, adjusted for currency effects, to 22.5 billion euros. Calculated in euros, growth was six percent. The operating result collapsed from almost two billion to 669 million euros. Profit from continuing operations fell from 1.5 billion to 254 million euros. “The numbers speak for themselves. We are currently not performing as well as we should,” says Gulden. 2023 will be a “year of transition to create the basis for becoming a growing and profitable company again”. Adidas wants to grow again in 2024.
The end of the collaboration with the rapper hits Adidas hard
How quickly the turnaround succeeds is largely related to the issue of Kanye West. His Yeezy collection brought huge sums of money not only to him, but also to Adidas. Should Adidas now “irrevocably decide not to use its current inventory of Yeezy products following the terminated cooperation, this would entail the depreciation of the Yeezy inventory and reduce the operating result by a further 500 million euros,” Adidas said on Thursday evening. In addition, there would be one-off costs of 200 million euros. Adidas, Gulden continued, “has everything it takes to be successful: a great brand, great employees, fantastic partners and a global infrastructure that is second to none. We have to put the pieces back together.” He is convinced that Adidas will soon shine again. But: “We will need some time for that.”