Status: 02/10/2023 10:47 a.m
The separation from rapper Kanye West could result in a loss of several hundred million euros for the sports goods manufacturer Adidas. A warning from the group causes the stock to plummet.
The termination of the partnership with the controversial rapper Kanye West is associated with horrendous costs for Adidas. The sporting goods group is therefore likely to slip into the red in the current year. In the worst case, an operating loss of 700 million euros can be expected in 2023, in the best case a black zero, said the Adidas management.
Various options for the future use of the inventory of “Yeezy” products from the partnership are still being examined. However, if there is no sale, a considerable negative effect can be expected.
Massive loss of sales
Due to the separation from the rapper, the company was said to have lost 1.2 billion euros in sales this year. In addition, there are 500 million euros, by which the operating result will be reduced. Customers paid between $200 and $700 for Yeezy shoes and apparel.
The end of the partnership had already cost Adidas 250 million euros in profit in the Christmas business. 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.
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, the group warned that 500 million euros would have to be written off.
Billion market value destroyed for the time being
Investors reacted strongly to the board’s warning. At times, the share fell by more than ten percent on the stock exchange and reached its lowest level of the day at EUR 138.50. This cost the company a market value of over 2.5 billion euros. Currently, the price losses have reduced slightly.
Adidas had ended its long-term collaboration with the US rapper after he had repeatedly made negative headlines with verbal abuse and anti-Semitic statements. The “Yeezy” brand designed by West had generated billions in sales and high margins for years; then Adidas imposed a sales freeze.
Group has several problems
In the past financial year, group sales adjusted for currency effects increased by one percent to 22.5 billion. The operating result, on the other hand, collapsed by more than two thirds to 669 million euros. The bottom line is that only 254 million will remain in 2022. For the current year, analysts had previously expected billions in profits. The group can no longer do that.
The fact that no more “Yeezy” products are sold is not the only problem for the DAX group, writes the analyst Andreas Riemann from the investment bank Oddo BHF in a recent study. Adidas has too many products, ignores wholesale and is organized too decentrally.
New boss wants to grow profitably from 2024
The new CEO Björn Gulden, who changed from rival 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,” he explained. 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’ll make Adidas shine again,” said Gulden. “But we will need some time for that.”