Adidas warns of large profit losses after termination of the Ye partnership

Adidas warns of large profit losses after termination of the Ye partnership
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Kanye West at an event to announce a partnership with Adidas on June 28, 2016 in Hollywood, California.

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Adidas lowered its full-year guidance on Wednesday due to the end of the German sportswear giant’s partnership with Kanye West’s Yeezy brand.

The enterprise ended his relationship with Yeformerly known as Kanye West, on 10/25 after the musician launched a series of offensive and anti-Semitic tirades on social media and in interviews.

Adidas now forecasts net income from continuing operations of around 250 million euros ($251.56 million), down from a target of around 500 million euros set on October 14. 20. The company now expects currency-neutral sales for low single-digit growth in 2022, with gross margin now expected to be around 47% for the year.

Adidas posted a 4% currency-neutral sales increase year over year in the third quarter, with double-digit growth in e-commerce in EMEA, North America and Latin America. Gross margin declined one percentage point to 49.1% due to “higher supply chain costs, higher rebates and an unfavorable market mix,” the company said.

Operating profit was 564 million euros, while net income from continuing operations was 66 million euros after 479 million euros a year earlier “negatively impacted by several one-off costs of almost 300 million euros as well as extraordinary tax effects in Q3,” Adidas said .

Adidas is the latest company to drop Kanye West

‚ÄúThis amount differs from the preliminary figures published on October 20, 2022 due to negative tax impacts in the third quarter related to the company’s decision to end the partnership with adidas Yeezy. This negative tax effect is fully offset by a positive tax effect of similar size in Q4,” Adidas said.

The company also announced that it had already lowered its full-year guidance on Oct. 14. 20 due to “a further deterioration in traffic development in Greater China, increased clearance activities to reduce increased inventories and one-off total costs of around 500 million euros”.

“The market environment changed in early September as consumer demand eased in western markets and traffic trends in Greater China continued to deteriorate,” said Adidas CFO Harm Ohlmeyer in a statement.

“As a result, we have seen significant inventory builds across the industry, which has resulted in higher promotional activity as the year progresses, which will increasingly weigh on our revenues.”

Ohlmeyer said the company had been “encouraged” by “tangible” enthusiasm ahead of the FIFA World Cup in Qatar later this month.

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