Adidas AG is poised to mitigate its losses this year, thanks to the successful sale of its inventory of Yeezy sneakers, a collaboration that was canceled with rapper and designer Kanye West. The German sportswear company announced that it now anticipates an operating loss of €450 million ($499 million) in 2023, based on the initial batch of Yeezy products sold. This is a significant improvement from the potential operating loss of €700 million that Adidas had previously warned investors about, had they been forced to write off all existing Yeezy inventory.
In addition to the positive impact of the Yeezy sales, Adidas's overall business performance is better than expected. The company now forecasts a mid-single-digit decline in full-year sales, an improvement from the previous guidance of a high-single-digit decline. The second-quarter sales figures of €5.34 billion have also surpassed analyst estimates of €5.05 billion.
CEO Bjorn Gulden, who took over in January, has a track record of offering conservative financial targets early in the year and surpassing them. This was evident during his tenure at Puma SE, where he consistently outperformed expectations. Gulden's strategic decisions, such as ramping up production of the classic Samba sneakers to meet demand and observing signs of a rebound in demand in China, have instilled optimism in investors.
However, the fate of the Yeezy inventory has been a lingering concern for the company since the collaboration with Kanye West was terminated in October due to his controversial comments. The leftover Yeezy shoes were valued at approximately €1.2 billion. In May, Adidas announced its plan to sell the remaining Yeezy inventory, with a commitment to donating a significant portion of the proceeds to charities combating discrimination and hate speech.
With the recent success in Yeezy sales, Adidas now faces a potential write-off of €400 million for the remaining inventory, down from the previous estimation of €500 million. This positive development not only alleviates financial strain but also allows the company to refocus its efforts on other areas of growth and innovation.