Adidas Sees EUR500 Million Hit From Potential Yeezy Stock Writeoff -- Update

By Joshua Kirby

Adidas may write off all Yeezy stock following a recent split with designer Kanye West, resulting in a potential operating loss of 700 million euros ($749.9 million) this year, the sportswear giant said Thursday.

The hit from not rebranding and selling existing Yeezy stock would amount to around EUR500 million, with another EUR200 million also expected in one-off costs this year, Adidas said.

The company stressed that it is continuing to review its option for Yeezy inventory.

Germany's Adidas made the decision toward the end of last year to split with Yeezy founder and musician Kanye West, known as Ye, after a series of controversies including antisemitic comments.

Writing off Yeezy stock would hit 2023 revenue by EUR1.2 billion and lead to a one-year decline in the high-single digits, Adidas said. The company should stand around operating breakeven on an underlying basis, it said.

"The numbers speak for themselves," said Chief Executive Bjorn Gulden, who joined from rival Puma SE at the end of 2022. "We are currently not performing the way we should," he said.

The coming year "will be a year of transition to set the base to again be a growing and profitable company," Mr. Gulden added.

The company will focus on creating brand heat and improving its product pipeline and distribution, he said.

"But we need some time," he said.

Adidas meanwhile set out preliminary results for 2022, booking sales just above flat on year at EUR22.51 billion, and a major decline in operating profit to EUR669 million. As well as a hit from the Yeezy issue, Adidas suffered in 2022 from declining revenue in lockdown-hit China, as well as high inventory levels that added to pressure on its margins.

The company's operating margin slid to just 3%, from 9.4% the previous year, while net profit from continuing operations crashed to EUR254 million from EUR1.49 billion previously.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

(END) Dow Jones Newswires

February 09, 2023 13:29 ET (18:29 GMT)

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