Adidas has issued a warning that it may experience its first annual operating loss in more than three decades this year, primarily due to the possibility that it will have to write off the whole line of apparel and footwear bearing the Yeezy name.
The German sportswear manufacturer announced on Wednesday that it would experience its first operating loss in 31 years this year with an operating loss of €700 million (roughly Ksh. 95.1 billion) due to a potential €500 million (roughly Ksh. 68 billion) hit from unsold Yeezy stock and the cost of a strategic review.
Following the release of Adidas' 2022 results and 2023 projection on Wednesday morning, the company's shares decreased by 2.2%.
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In October, the business ended its lucrative nine-year association with musician and Yeezy designer Ye (formerly known as Kanye West).
Adidas warned last month that the separation, after Ye made several antisemitic remarks, might cause its annual revenue to fall by €1.2 billion (about Ksh. 163 billion) this year.
Adidas reported on Wednesday that the rupture reduced the company's fourth-quarter revenue by about €600 million (about Ksh. 81.5 billion). Yet, the controversy has increased demand for Yeezy sneakers from other retailers.
John Mocadlo, the CEO of Impossible Kicks, a sizable online retailer of upscale footwear and apparel, claimed last week that shoe demand had increased by 30% since late October.
Adidas indicated without going into further detail that it could perform better this year if it "repurposes" certain of its Yeezy pr
Chief Financial Harm Ohlmeyer referred to last year as a disappointing year due to the gloomy outlook for Adidas.
When discussing Wednesday's business results, he declared, "We obviously did not perform as we should have. Operating profit was €669 million, a 66% decrease from the prior year (around 90.1 billion).
Although the company's global sales increased by 1% last year, its biggest single market, China, witnessed a 36% annual sales fall due in part to the country's now-discontinued zero-Covid policy.
This year, Adidas is hoping, will be a turning moment. Bjørn Gulden, Adidas Chief Executive Officer, said in a statement that 2023 will be a year of transition to set the base for a growing and profitable company. He said he was convinced that Adidas would shine again.
