Adidas warned that it anticipates a high single-digit loss in sales this year, which caused its shares to fall more than 10% in early Friday premarket trade.
The sporting goods manufacturer, which last October reviewed its business relationship with rapper and fashion designer Kanye West, stated late on Thursday that by holding onto its current Yeezy stock, revenue in 2023 could be reduced by approximately 1.2 billion euros ($1.29 billion) and operating profit by approximately 500 million euros, to roughly break-even.
According to a consensus published on Adidas’ website, analysts had anticipated an operating profit of 1.02 billion euros and a 4% increase in revenue in 2023 on a currency-neutral basis.
While considering future alternatives for using its Yeezy inventory, the business noted in a statement that “this projection already includes the major detrimental impact of not selling the existing stock.”
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The forecast, according to Baader Helvea, is “terrible” and “extremely depressing.”
By increasing revenue in 2022 by just 1% in currency-neutral terms, it failed its own projections, according to the report.
As part of a study to come back to profitable growth in 2024, Adidas claimed that completely writing off the Yeezy inventory would result in a 500 million euro decrease in operating profit and up to 200 million euro in one-time expenditures in 2023.
According to the group, the worst-case scenario would result in a loss of 700 million euros this year.
Due to “challenges in defining the mid-term profit delivery,” Jefferies changed its recommendation on Adidas stock from “buy” to “hold.”
Due to decreased demand in China and Western countries as well as one-time costs associated with leaving Russia, Adidas reduced its full-year projection in October to mid-single digit percentage revenue growth and a 4% operating margin.
The corporation, however, performed worse than anticipated, as evidenced by Thursday’s results, which produced an operating margin of 3%.
On March 8, it will present its complete annual results.
($1 = 0.9307 euros)
