Home » Adidas takes $763-million hit in Q4 following Kanye West’s exit

Adidas takes $763-million hit in Q4 following Kanye West’s exit

by Omokolade Ajayi
Kanye West

Amidst Kanye West’s departure, Adidas, the German multinational sportswear giant, has reported a significant fourth-quarter operating loss of €724 million ($765 million) and a net loss of €482 million ($510 million) from continuing operations

Adidas faced a decline in currency-neutral revenues of one percent in the fourth quarter due to a surplus of unsold Yeezy inventory following the termination of its partnership with Kanye West’s Yeezy brand. The partnership was terminated in October 2022 after West made antisemitic comments that went against Adidas’ values of diversity and inclusion, and equality.

As Adidas evaluates its options for utilizing the excess Yeezy inventory, the company expects a high-single-digit revenue decline throughout 2023. Additionally, it anticipates a full-year operating loss of €700 million ($740 million) in 2023, marking its first annual loss in 31 years.

Adidas is facing a significant financial setback as it grapples with a potential write-off of €500 million ($528.6 million) in Yeezy inventory belonging to West, as well as €200 million ($211.5 million) in one-time expenses. This has prompted S&P Global Ratings, a U.S.-based credit rating agency, to downgrade Adidas’ long- and short-term credit ratings.

Adidas executives unfazed by Kanye West’s exit, remain confident amidst underwhelming results

Adidas CEO Bjorn Gulden provided further details on the company’s fourth-quarter results, revealing that 2023 will be a “transition year” for the brand. As part of its efforts to regain profitability by 2024, Adidas will focus on reducing inventories and minimizing discounts.

Gulden, who succeeded Kasper Rorsted earlier this year, emphasized the importance of this strategic shift as the company aims to maintain its competitive edge in the global market.

“Motivated people and a strong Adidas culture are the most important factors to build a unique Adidas business model again. “Adidas has all the ingredients to be successful, but we need to put our focus back on our core: product, consumers, retail partners, and athletes,” Gulden said. 

Adidas shares defy financial headwinds, shares surge almost 6 percent in one week

Adidas’ lackluster financial performance has prompted the board to recommend a reduced dividend of €0.70 ($0.74) per share at its upcoming annual general meeting on May 11, compared to €3.3 ($3.49) per share in 2021.

However, despite this setback, investors remain optimistic about the company’s “transition strategy,” which has contributed to a 5.96-percent increase in Adidas shares since the start of the week, and a year-to-date gain of nearly 19 percent.

Among the investors who have benefited from this impressive rise is Egypt’s wealthiest individual Nassef Sawiris, whose net worth has increased by over $240 million from $7.03 billion to $7.27 billion since the start of the year.

Despite this surge, Sawiris has slipped down one spot on the list of Africa’s richest people, having been overtaken by Nigerian cement tycoon Abdul Samad Rabiu, the head of BUA Group, one of the continent’s most rapidly expanding conglomerates.

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