It was reported that the German shoe giant, Adidas, would face a massive loss in 2023 – their first in 31 years – following their split with Kanye West.
The company recorded a fourth-quarter operating loss of $763 million and is now projecting a full-operating loss of $738 million for the coming year.
Adidas has estimated that their operating profits will remain at a break-even level, and this is due to the predicted sales loss of €1.2 billion with a corresponding negative functional profit impact of around €500 million from the potential inability to sell Yeezy stock.
Additionally, it is estimated that there will be a €700 million reported operating loss, including an additional €500 million from inventory write-offs and up to €200 million in one-off costs.
“The next three years will be critical for Adidas,” stated CEO Bjørn Gulden.
He said 2023 will be a transition period where they must focus on reducing inventories and cutting back discounts to build the foundation for a more profitable business in 2024 and 2025.
Gulden added that for any company to be successful, it must have the right components.
He said to build Adidas again, “we need to refocus our attention on the most significant things: product, consumers, retail partners and athletes.”
The CEO is reportedly confident that dedicating themselves to developing motivated people and an even stronger culture within their organization will enable them to create a unique business model once more.
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Following the hateful speech and actions of Kanye West, Adidas decided to end its partnership with Yeezy last year.
The joint venture between Ye and Adidas, which began in 2015, will no longer produce Yeezy products or make payments to the rapper. This was announced through a statement by the company.
Experts in apparel have warned that Adidas’ decision to remove Yeezy products from stores and online could cost them hundreds of millions of dollars, ABC News reported.
Not only would they miss out on potential sales, but it would also mean a decrease in revenue.
In recent weeks, the “Donda” rapper’s antisemitic comments on Twitter, podcasts, and interviews have prompted an outcry for a break in the relationship between him and the sportswear giant.
As 15% of their net income had been attributed to their Yeezy line, executives at Adidas now in search of an appropriate substitute. Analysts have noted that this could prove to be a challenging task for them.
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