Abandoning Yeezy partnership leads to financial setback for Adidas
- Adidas reports first loss in 30 years after terminating partnership with Kanye West
- Loss of €58m in 2023 compared to €254m profit in prior year
- 5% decrease in revenues to €21.4bn, with discontinuation of Yeezy line causing a drag of around €500m
- Operating profit declined from €669m in 2022 to €268m in 2023
- Adidas explores scenarios for potential use of existing Yeezy inventory
- Agreement reached with Kanye West to sell outstanding Yeezy inventory
- Currency-neutral sales expected to grow at mid-single-digit rate in 2024
- CEO confident in brand’s future and expects growth in second half of the year
Adidas has posted its first loss in more than three decades following the financial blow from abandoning its deal with the rapper Kanye West. The group reported a loss of €58m (£50m) in 2023 compared with €254m (£217m) profit in the prior year. The company also reported a 5% decrease in revenues to €21.4bn (£18.3bn), with the discontinuation of its Yeezy line causing a drag of around €500m (£427m). Additionally, its operating profit declined from €669m (571.2m) in 2022 to €268m (£228.8m) in 2023. Adidas ended its working partnership with rapper Kanye West, saying it “does not tolerate antisemitism”, after West published offensive posts on his Instagram and Twitter accounts in October 2022. Since terminating the Yeezy partnership in October, Adidas has explored multiple scenarios for the potential use of the existing Yeezy inventory. In May 2023, the group reached an agreement with the rapper to sell some of its outstanding Yeezy inventory because destroying it would force the company to write off another €500m (£431.8m). All proceeds have been donated to selected organisations working to combat discrimination and hate, including racism and antisemitism. Looking ahead, the group expects currency-neutral sales to grow at a mid-single-digit rate in 2024. This top-line guidance assumes that Adidas will sell the remaining Yeezy inventory at cost, which would result in sales of around €250m (£213.4m) in 2024. Bjørn Gulden, CEO of Adidas, said: “Despite losing a lot of Yeezy revenue and a very conservative sell-in strategy, we managed to have flat revenues. We expected to have a substantial negative operating result, but achieved an operating profit of €268m. With a very disciplined go-to-market and buying process, we reduced our inventories by almost €1.5bn. With the exception of the US, we now have healthy inventories everywhere. “The product for 2024 is good, our new marketing campaigns for both Originals and in Performance will continue to strengthen the brand. Our Sportswear business with clear takedown strategies will strengthen the distribution in the commercial channels in both wholesale and DTC.” Gulden added: “We should see some growth already in Q1, but I expect growth to be stronger in the second half of the year. We still have a lot of work to do, but I feel very confident we are on the right track. We will bring Adidas back again.”.
Factuality Level: 9
Factuality Justification: The article provides a detailed account of Adidas’ financial situation, including the loss incurred due to ending the partnership with Kanye West, the impact on revenues, and the company’s future plans. The information is presented objectively without sensationalism or bias, and the facts are supported by specific figures and statements from Adidas’ CEO.
Noise Level: 3
Noise Justification: The article provides relevant information about Adidas’ financial loss due to ending the partnership with Kanye West. It includes details on the impact on revenues, profits, and future sales projections. The article also mentions the reasons for terminating the partnership and the steps taken to address the inventory issue. Overall, the article stays on topic, supports its claims with data, and offers insights into Adidas’ strategies moving forward.
Financial Relevance: Yes
Financial Markets Impacted: Adidas
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Rating Justification: The article pertains to financial topics as it discusses Adidas’ financial performance, including its first loss in over three decades and the impact of ending its partnership with Kanye West. However, there is no mention of an extreme event.
www.retailsector.co.uk