Sportswear giant Adidas has said it is still mulling its future options for Yeezy, the brand of its former collaborator Kanye West, as it reported that it expects any stock write-off to take a hit on its revenues.
In the company’s financial guidance report for 2023, Adidas accounted for the “significant adverse impact” that would be caused by not selling existing Yeezy stock, which could see its revenues lowered by 1.2 billion dollars, while its operating profit would fall by 500 million euros.
In light of this, the brand said it is expecting currency-neutral sales to decline at a high-single-digit rate, with its operating profit projected to sit around the break-even point.
It noted that if a write-off of Yeezy products was to be decided upon, it could lower the company’s operating profit by a further 500 million euros this year.
This would add to the further one-off costs of up to 200 million euros, which come as part of the strategic review the company is currently undergoing. In total, the move would bring together an operating loss of 700 million euros.
A period of transition
In a statement, Adidas CEO Bjørn Gulden, addressed the poor performance of the company, noting that 2023 will be a period of “transition” as it looks towards building up growth and profitability again.
Gulden continued: “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.
“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.”
For 2022, the brand reported a one percent increase in revenues in currency-neutral terms, while its sales were up six percent to 22,511 million euros.
Its gross margin for the period sat at 47.3 percent, a 3.4 percent decline on the previous year, while its operating profit came in at 669 million euros, a decrease from 1,986 million euros in 2021.
Additionally, its net income from continuing operations was 254 million euros in 2022, another decrease from 1,492 million euros from the year prior.