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adidas to lose a staggering € 1.2 billion this year after fallout with Kanye West

According to new financial guidance released by adidas, the German footwear and apparel giant will lose more than € 1.2 billion after terminating its relationship with billionaire rapper Kanye West following his anti-Semitic tirades last year.

In a Friday (February 10) statement, the company said while it continues to review future options for the utilization of its Yeezy inventory, the decision has accounted for the significant adverse impact of not selling the existing stock. According to the company, the decision reduced revenues by approximately € 1.2 billion and operating profit by approximately € 500 million this year.

adidas also revealed that if no existing Yeezy product is repurposed in the future, an additional € 500 million will be lost from the existing Yeezy inventory, reducing the company’s operating profit by this year. Furthermore, in 2023, adidas anticipates one-time costs of up to € 200 million.If all these effects were to materialize, the company would expect to report an operating loss of €700 million in 2023.

“The numbers speak for themselves. We are currently not performing the way we should”, said adidas CEO Bjørn Gulden. “2023 will be a year of transition to set the base to again be a growing and profitable company. We will put full focus on the consumer, our athletes, our retail partners and our adidas employees. Together we will work on creating brand heat, improve our product engine, better serve our distribution and assure that adidas is a great and fun place to work. adidas has all the ingredients to be successful: A great brand, great people, fantastic partners and a global infrastructure second to none. We need to put the pieces back together again, but I am convinced that over time we will make adidas shine again. But we need some time.”

In 2022, based on preliminary unaudited numbers, adidas revenues increased 1% in currency-neutral terms. In reported terms, sales were up 6% to € 22,511 million during the 12-months period (2021: € 21,234 million). The company’s gross margin reached a level of 47.3% (2021: 50.7%) in 2022. adidas generated an operating profit of € 669 million last year (2021: € 1,986 million), reflecting an operating margin of 3.0% (2021: 9.4%). Net income from continuing operations was € 254 million in 2022 (2021: € 1,492 million).



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