Adidas shares slide as fallout from Kanye West tie-up deepens

Adidas has warned it could face an operating loss of up to €700mn this year after its ill-fated tie-up with Kanye West left the group with unsold Yeezy shoes, sending shares in the sportswear maker sliding on Friday.

The German group on Thursday evening issued its fourth profit warning since July, laying out a worst-case scenario in which it would have to write off all the remaining inventory.

The tie-up with West had proved highly profitable for Adidas but the company ditched it in October after the rapper and fashion designer caused an international outcry with antisemitic remarks.

In his first public comments since taking over as chief executive last month, Bjørn Gulden said the company needed time to “put the pieces back together”.

“The numbers speak for themselves. We are currently not performing the way we should,” said Gulden, who joined from Adidas’s local rival Puma after his predecessor Kasper Rørsted was ousted following a series of profit warnings last summer.

“The new adidas CEO is making his mark,” Deutsche Bank analyst Adam Cochrane wrote in a note to clients, adding that Gulden had “now rebased the earnings expectations and has a clean slate to start a new chapter for Adidas”.

Adidas said late on Thursday that it was likely to lose about €1.2bn in annual sales and €500mn in operating profit this year following the decision to sever ties with West. An internal review into what to do with unsold Yeezy kit was ongoing, the group said.

Citi analysts called the profit warning “material” and akin to a “reset”.

Shares in Adidas fell as much as 10 per cent in early trading on Friday.

The group has been hit not just by the Yeezy debacle but also by its decision to quit Russia and its travails in the Chinese market.

Gulden said “2023 will be a year of transition to set the base to again be a growing and profitable company”, adding that he wanted to “improve our product engine, better serve our distribution and assure that Adidas is a great and fun place to work”.

“Today seems to be about more [short-term] pain to arrive at a better functioning, higher full-price sales model in a quicker way”, said Jefferies analyst James Grzinic.

Based on unaudited numbers, sales in 2022 rose 1 per cent adjusted for currency swings to €22.5bn, about €300mn below analysts’ expectations, according to a consensus survey published by the company. Operating profit fell by two-thirds to €669mn.

Adidas will report detailed results for last year on March 8.