Adidas plunges as Kanye split triggers new profit warning

© Reuters. FILE PHOTO: The Adidas logo is pictured inside a shoe before the company’s annual meeting in Fuerth near Nuremberg, Germany, May 11, 2017. REUTERS/Michaela Rehle

BERLIN (Reuters) – Adidas shares fell as much as 11 percent on Friday after the sportswear maker warned the consequences of a split with Kanye West could wipe out this year’s operating profit, warns fourth profit in less than six months.

The German group, which in October ended its partnership with the rapper and fashion designer now known as Ye after he made hostile remarks, said late Thursday that the non-sale The remaining stock from his Yeezy brand could reduce revenue by around 1.2 billion euros ($1.3 billion) in 2023 and operating profit by about 500 million euros to breakeven.

It forecasts sales will fall in single digits this year. Analysts on average had expected 2023 revenue to grow 4% on a currency-neutral basis and operating profit of 1.02 billion euros, according to data on Adidas’ website (OTC:).

Shares of Adidas were 9% lower at 08:30 GMT.

“While the company continues to consider future options for using its Yeezy inventory, this guidance takes into account the significant adverse impact of not selling existing inventory,” it said. said in a statement.

Adidas also said that completely eliminating Yeezy’s inventory – rather than, for example, reusing it – could lead to an additional €500 million drop in 2023 operating profit and possibly an additional one-time loss. 200 million euros as part of a review to return to profitable growth by 2024.

The organization warned that that would lead to a worst-case scenario of a loss of 700 million euros this year.

Baader Helvea described the guide as “terrible” and very disappointing.

The news comes as Adidas missed its own forecast with a mere 1% increase in revenue in 2022 under currency-neutral terms.

Jefferies cut its recommendation on Adidas stock to “hold” from “buy,” citing “challenges in determining medium-term returns.”

Adidas downgraded its October 2022 forecast to single-digit percentage revenue growth and 4% operating margin due to weaker demand in China and Western markets as well as expenses incurred in connection with leaving Russia.

But Thursday’s results showed the company performed worse than expected, delivering an operating profit margin of 3%.

It will report its full 2022 results on March 8.

($1 = 0.9307 euros)

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