Adidas warns of ‘significant’ impact on profits as it counts cost of Yeezy fallout

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Adidas has warned it could take a €1.2bn (£1.06bn) hit in revenues and swing to a loss this year if it chooses not to sell its remaining Yeezy stock.

Kanye West and Adidas chief marketing officer Eric Liedtke

Adidas cut ties with Ye (pictured, right, next to Adidas chief marketing officer Eric Liedtke) after he made anti-semitic remarks

Adidas expects to suffer a reduction of €500m (£441.5m) in operating profits this year should it write off its Yeezy inventory and decide to not repurpose it going forward.

The sportswear giant ended its successful partnership with Kanye West, now known as Ye, in October last year after the rapper made anti-semitic remarks on social media.

Adidas reported that it expects sales to decline at a high-single-digit rate in 2023 against this background, which would plummet the company’s operating profit to a break-even level.

Additionally, the company also expects one-off costs of up to €200m (£176.6m) in 2023 as a result of its strategic review aimed at increasing profits by 2024.

In its fourth profit warning since July, Adidas said that if all this were to materialise, the company would suffer a combined loss of €700m (£618.1m) in operating profits and a €1.2bn (£1.06bn) hit in revenues.

Adidas chief executive Bjørn Gulden said: “The numbers speak for themselves. We are currently not performing the way we should.

“2023 will be a year of transition to set the base to again be a growing and profitable company. We will put full focus on the consumer, our athletes, our retail partners and our Adidas employees.

“Together we will work on creating brand heat, improve our product engine, better serve our distribution and assure that Adidas is a great and fun place to work. Adidas has all the ingredients to be successful: a great brand, great people, fantastic partners and a global infrastructure second to none.

“We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again. But we need some time.”

In 2022, Adidas reported a 1% increase in revenue in currency-neutral terms based on its preliminary unaudited numbers with a net income of €254m (£225m). This is less than one-fifth of the €1,492m (£1,320m) net income the business reported in 2021.