Adidas boss sees turnaround after Kanye West split

  • Split with Kanye West weighs on 2022 results
  • Dividend drops to 0.7 euros/share
  • CEO promises turnaround after predicted loss in 2023
  • Adidas is still deciding whether to reuse Yeezy stock

HERZOGENAURACH, Germany/London, March 8 (Reuters) – Adidas (ADSGn.DE) will cut its dividend for 2022, the sportswear maker said on Wednesday, after warning that a split with artist formerly known as Kanye West could to its first annual loss in three decades this year.

Chief Executive Bjorn Gulden, who will speak to investors later today for the first time since taking the reins on January 1, vowed to rebuild the bruised brand after dealing with the fallout from the partnership ending. Adidas and West, which now passes Yes, which spawned the lucrative Yeezy sneaker line.

Adidas has not said how much the Yeezy brand has made since its first deal with Ye in late 2013, but analysts estimate it accounted for as much as 7% of total sales in its prime.

The company needs to refocus on its core business and faces a “year of transition” before it returns to profit in 2024 and will return to its sports-based roots, Gulden said.

“You’ll see us investing in more sports…because that’s the DNA of this company,” he told reporters.

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The company will recommend a dividend of 0.70 euros ($0.7374) per share at an annual general meeting on May 11, up from 3.30 euros per share in 2021.

Adidas shares were down 2.1% by 1230 GMT. However, they have outperformed rivals Puma and Nike since the start of the year, a sign that investors are behind Gulden.

“We believe the stock is not discounting the time it takes to rebuild the brand and margins,” Credit Suisse analyst Simon Irwin said in a note.

The company cut ties with Ye in October after a series of anti-Semitic remarks he made on social media and in interviews, which also led Twitter and Instagram to restrict his accounts on their platforms.

Gulden said Adidas is still deciding what to do with its inventory of unsold Yeezy shoes. Burning the shoes poses a sustainability issue, he said, while giving them away to charity is complicated because of their resale value, which has skyrocketed since the split.

A pair of Yeezy 350 “Zebra” shoes is now selling for between $340 and $360, compared to about $260 four months ago, according to John Mocadlo, CEO of US sneaker reseller Impossible Kicks.

One option could be for Adidas to donate proceeds from the sale of recycled Yeezy stock to charity, Gulden said.

The split cost Adidas 600 million euros ($632 million) in sales in the fourth quarter of 2022, and Yeezy shoes are estimated to have brought in $1.2 billion in revenue this year.

Gulden said ending Yeezy – a decision that predated him taking over – was the right thing to do, but added that it was “very sad” and that it would take time for Adidas to make a new move. build a brand that is just as influential.

Closing the gap left by Yeezy won’t be easy, Gulden said.

One area of ​​growth he pointed out is a trend for ‘terrace’ style sneakers such as the Samba, Gazelle and Spezial. He mentioned Adidas stores selling Samba shoes that are drawing queues of customers in China.

“For the first time in a long, long time, people are lining up to buy an Adi product that isn’t Yeezy.”


Overall, Gulden said Adidas needs to reduce inventory levels and cut fewer discounts. Inventories stood at just under €6 billion at the end of December, an increase of 49% over the previous year, including €400 million of Yeezy products.

The company forecast underlying operating profit for 2023 at about breakeven, taking into account the $500 million loss from not selling existing Yeezy shares.

If Adidas decides not to reuse the products, it will write off the inventory altogether, reducing profits by another $500 million. That, along with $200 million in one-time costs, would put Adidas at a loss of $700 million this year.

RBC analysts said they see the full write-down as the most likely scenario.

Analysts at Wedbush who track the launch of new sneaker products said Nike will likely take market share from Adidas if there are no new Yeezy designs.

Adidas lags behind Nike and Puma

($1 = 0.9493 euros)

Reporting by Alexander Huebner and Helen Reid; additional reporting by Friederike Heine and Uday Sampath Kumar; Edited by Paul Carrel, Matt Scuffham and Emelia Sithole-Matarise

Our Standards: The Thomson Reuters Principles of Trust.


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