By CultureBanx Team
- Adidas expects to clock an operating loss upwards of 700M euros ($772 million) in 2023 due to the unsold stock of Yeezy footwear
- Revenue comparison drag on the company’s year-over-year numbers due to the discontinuation of the Yeezy business, was mainly across the North America, Greater China and EMEA regions
Adidas (ADDYY +0.86%), the world’s second-biggest sports apparel brand, has been struggling to figure out what to do with the mountain of unsold Yeezy sneakers in its inventory. Since cutting ties with Ye, the artist formerly known as Kanye West in October, the company expects to clock an operating loss upwards of 700 million euros ($772 million) in 2023 due to the unsold stock of Yeezy footwear.
Why This Matters: The sportswear giant reported a 1% dip in year-over-year Q1 revenue, even though analysts predicted a 4% drop. Adidas reported $5.82 billion in Q1 2023 revenue. Revenue comparison drag on the company’s year-over-year numbers due to the discontinuation of the Yeezy business, was mainly across the North America, Greater China and EMEA regions.
“2023 will be a bumpy year with disappointing numbers, where maximizing our short-term financial results is not our goal, said Adidas’ CEO during their earnings call.
He also admitted that the loss of the Yeezy brand is “of course hurting us.” However, the German footwear and apparel company claims it has all the patents and copyrights for the IP, designs, and colorways, and it can omit the branding and continue selling the shoe. In February 2023, Adidas quietly shut down the Yeezysupply.com website.
Last week, a group of Adidas shareholders filed a class-action lawsuit against the company, saying it should have known better than to partner with Ye. In November 2022, Adidas launched a probe into Ye’s behavior over seven years of co-designing at the company.
Adidas’ main problem is its strategy over the last few years that has centered on partnerships with other artists including Bad Bunny, Pharell Williams, and Beyoncé that haven’t always met financial expectations. Sales for Ivy Park fell more than 50% to $40 million in 2022, far below the $250 million Adidas projected, according to the Wall Street Journal. The existing contract between the musician and the brand, which pays the former $20 million annually, was already set to expire at the end of this year.
What’s Next: The three-stripes company gave no concrete update on what it plans to do with its pile of Yeezys, and it really needs to find the next big thing to spur revenues. Right now, Adidas has turned to its other product lines to lift sales and stated it has seen “extraordinary demand” for its Samba, Gazelle, Campus brands leading the company to start producing them at larger scale.
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