Adidas could see $1.27B sales loss from Yeezy fallout

Adidas has a long road to recovery from its breakup with Ye, formerly known as Kanye West.

The athletic apparel and footwear retailer’s split from Ye — which came in October after the rapper and designer made antisemitic comments — could lead to the company’s first annual loss in three decades. Analysts estimate the Yeezy brand accounted for as much as 7% of total sales. 

The end of the relationship cost Adidas $633 million in fourth-quarter sales and could reflect a $1.27 billion sales loss in 2023 “from potentially not selling the existing stock.”

If Adidas decides to not sell the remaining stock, the company’s operating profit for 2023 would be lowered by $527.1 million. With another $210.9 million in one-off costs, Adidas could report a loss of $738 million in 2023, compared to 2022’s $268 million of net income from continuing operations.

The company’s 2022 net sales increased 6% to $23.8 billion, but operating profit fell 66% to $705.4 million.

Adidas expects currency-neutral revenues to decline at a high-single-digit rate in 2023.

“2023 will be a transition year to build the base for 2024 and 2025,” said Bjorn Gulden, Adidas CEO. “We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024.”

Gulden also said the company will invest in more sports because it’s the “DNA” of the company.