Despite the slump in profits: “Golden Parachute” for ex-Adidas boss

Status: 03/08/2023 12:14 p.m

The farewell to his sacked boss Kasper Rorsted is associated with enormous costs for Adidas. While the dividend for shareholders will be greatly reduced, the Dane will receive almost 16 million euros.

The premature farewell to CEO Kasper Rorsted is expensive for Adidas. The Dane gets almost 16 million euros from his former employer. The severance payment for Rorsted alone, who left the Franconian sporting goods group in November, amounts to twelve million euros. This emerges from the annual report, which was published today.

Exceptionally high severance pay

In addition, there are around 3.6 million euros as compensation for not hiring with an industry competitor in the next 18 months, and the remaining salary of around 300,000 euros for November and December. Rorsted’s contract was extended by five years in 2021.

Market observers speak of a “golden parachute” for Rorsted. This refers to exceptionally high severance payments that have to be paid to senior employees or executives in the event of a takeover or termination. The term originally comes from the USA and became common there during the 1980s when many company takeovers took place.

No bonuses for the board

However, Rorsted and his fellow board members had to cut back on salary last year. They received neither a performance-related bonus for 2022 nor long-term stock-based bonuses. A year earlier, the latter had totaled 14.2 million euros.

The background is a slump in profits last year: Profits from continuing operations fell from almost 1.5 billion to 254 million euros. In the fourth quarter there was even a loss of 482 million euros – after a profit of 123 million euros a year earlier.

Expensive Yeezy failure

Persistent problems in China and the separation from scandalous rapper Kanye West had torn deep holes in the balance sheet. In the final quarter of 2022, revenues of around 600 million euros were lost due to the terminated cooperation. For 2023, the group expects sales losses of 1.2 billion euros from this alone.

What to do with the Yeezy shoes

At the balance sheet press conference, the new Adidas boss Björn Gulden left open the way to deal with the billion-dollar inventory of “Yeezy” shoes. Rumors that an agreement has been reached with US rapper Kanye West on a $500 million sale of remaining stock are false. From a sustainability point of view, however, throwing away the shoes that have already been produced is not an option. If Adidas decides to sell the shoes after all, the proceeds will go to those who have been hurt by West’s comments.

Group cuts dividends

After the slump in profits, the shareholders of the sporting goods manufacturer also have to do without. You have to be prepared for a significantly lower dividend of EUR 0.70 per share. The cut is even stronger than analysts had expected on average.

Adidas had paid out EUR 3.30 per share for 2021, which means the dividend cut is almost 80 percent. The dividend yield falls to 0.5 percent.

Adidas stock under pressure

That doesn’t go down well on the stock market. With a minus of more than one percent, the Adidas share is one of the biggest DAX losers. The stock is not doing well, explains Jürgen Molnar, capital market strategist RoboMarkets. For investors, there is currently very little in favor of a long-term commitment.

CMC market analyst Oldenburger, on the other hand, is somewhat more optimistic about the future of Adidas: “The great hope now remains that China will recover and that the European Football Championship in Germany will trigger a new boom in fan articles.”

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