Yeh, breakup with China slowdown hurts Adidas earnings

FRANKFURT, Germany (AP) – Adidas’ Breakup with rapper formerly known as Kanye West And the inability to sell its popular Yeezy line of shoes helped batter earnings at the end of last year, leading to a net loss of 513 million euros ($540 million).

The fourth-quarter loss, attributed to higher supply costs in China and lower revenue, compared with a profit of 213 million euros in the same period a year earlier, the German shoe and sportswear maker said on Wednesday.

There may be more damage ahead The company forecasts a 500-million-euro hit to earnings this year if it decides not to recycle the remaining Yeezy products it has in stock. The company is forecasting an operating loss of 700 million euros in 2023.

Adidas parted ways with Ye in October Rapper’s anti-Semitic comments on social media And in interviews, other brands face pressure to end relationships. The company is now struggling to find a way to replace its banner Yeezy line, which analysts say accounts for as much as 15% of its total revenue.

CEO Bjorn Gulden said in a statement that 2023 will be “a transition year” and “we can then start building a profitable business again in 2024.”

Fourth-quarter net sales rose just 1.3% to 5.21 billion euros from the same quarter a year ago, holding back from nearly 600 million euros in lost revenue as a result of the decision to end the partnership with Ye.

The company cited a revenue decline of about 50% in China and higher costs for logistics and shipping, which could not be offset by higher prices.

For the full year, the Herzogenaurach, Germany-based company said it made a net profit of 638 million euros on sales, up 6% to 22.5 billion euros.

The company also said that it will Replacing its top sales and marketing executives. Global sales head Roland Aschel will leave the company after 33 years and will be succeeded by Arthur Hold, now head of the Europe, Middle East and Africa region.

Brian Gravy, head of global brands, will step down on March 31. CEO Gulden will take charge of its product and marketing operations.