Adidas Stock Hits a Massive Slump Following Kanye Split — With Potentially Massive Losses Ahead

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Adidas stock slumps as split from Kanye triggers new profit warnings.

Adidas shares fell after the company warned that the fallout from its split with Kanye could wipe out its operating profits this year for the first time in 30 years. The company missed its own forecasts with a rise of only 1% in 2022 revenue, cautioning that sales may fall further should Adidas fail to sell its remaining inventory of Yeezy shoes.

The company said that it could write off inventory of the rapper’s Yeezy brand altogether, leading to a 700 million euro ($749 million) loss this year. The German apparel giant said it was still evaluating whether it would be able to repurpose its Yeezy stock since not selling could result in revenues taking a 1.2 billion euro hit by the end of 2023.

“The numbers speak for themselves. We are currently not performing the way we should,” says CEO Bjorn Gulden, who joined the company on January 1 after switching from rival company Puma. Gulden promises a “year of transition” to make Adidas profitable again.

“We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again,” Gulden adds. “But we need some time.”

Still, Yeezy is not Adidas’ only challenge. Investors fear high inflation across Europe and the US could drag down sales over the next several months. The company is also grappling with feeble sales of its new flagship collaboration with Beyonce.

The company’s fourth profit warning in less than six months forecasted a high single-digit decline in sales for the year, while analysts expected an average 4% rise in 2023 revenue on a currency-neutral basis. Adidas also reported a 6% revenue gain in 2022, while operating profit clocked in at 669 million euros, down two-thirds compared to 2021. The company is scheduled to publish its official 2022 financial results next month.