Shares slide as Adidas warns on profits
By Abigail Townsend
Date: Friday 10 Feb 2023
(Sharecast News) - Shares in Adidas fell sharply on Friday after the sportswear giant issued its fourth profits warning in less than a year.
The German firm said ending its partnership with controversial rapper Kanye West was set to wipe millions off annual profits.
It ended the ill-fated relationship last year, after West - who designs trainers under the Yeezy brand - caused international uproar by posting a series of anti-Semitic comments on social media.
Adidas said not selling existing Yeezy stock would lower revenues by around €1.2bn this year, and operating profits by around €500m.
That would result in currency-neutral sales falling at a "high" single-digit rate - sharply below analyst forecasts - and underlying operating profit coming in at breakeven.
However, the firm - which is still reviewing what to do with the Yeezy inventory - warned that should it opt to scrap the remaining stock, rather than repurpose it, the write-off would hit operating profits by "an additional €500m".
Combined with forecast restructuring costs of up to €200m, Adidas warned: "If all these effects were to materialise, the company would expect to report an operating loss of €700m in 2023."
As at 0945 GMT on Friday, shares in Adidas were down 11%. It issued the update after markets closed on Thursday.
Bjorn Gulden, Adidas's newly installed chief executive, said: "The numbers speak for themselves. We are not currently 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 need to put the pieces back together again. I am convinced that over time we will make Adidas shine again. But we need some time."
Adidas' tie-up with West had initially been extremely successful, with the hugely popular trainers selling for high prices. But as West's behaviour became more erratic, Adidas was eventually forced to end the relationship last October.
Gulden joined Adidas from rival Puma after his predecessor Kasper Rorsted was ousted last summer.
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