Adidas warns of big revenue hit after ending Ye partnership

Kanye West at an event announcing a partnership with Adidas on June 28, 2016 in Hollywood, California.

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Adidas On Wednesday, the German sportswear company cut its full-year guidance on the back of the company ending its partnership with Kanye West’s Yeezy brand.

Company ended the relationship with YeFormerly known as Kanye West, the musician on October 25 launched a series of offensive and antisemitic rants on social media and in interviews.

Adidas now expects net income from continuing operations of 250 million euros ($251.56 million), Oct. A reduction from the target of around 500 million euros set on 20 The company now expects currency-neutral revenue to grow in the low single digits. 2022, the gross margin is expected to be 47% for the year.

Adidas reported a 4% year-over-year increase in currency-neutral sales in the third quarter, with double-digit growth in e-commerce in EMEA, North America and Latin America. Gross margin fell one percentage point to 49.1% on the back of “higher supply chain costs, higher discounting and unfavorable market mix,” the company said.

Operating profit came in at 564 million euros, while net income from continuing operations of 66 million euros, down from 479 million euros a year earlier, was “negatively impacted by approximately 300 million in costs and extraordinary tax effects in Q3,” Adidas said.

“This amount differs from the preliminary figure released on October 20, 2022 due to negative tax impacts in the third quarter related to the company’s decision to terminate the adidas Yeezy partnership. This negative tax impact will be fully offset by positive tax impacts of the same amount in Q4,” Adidas said.

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“The company revealed on October 20 that it had already lowered its full-year guidance by 500 million euros, as a result of further worsening traffic trends in Greater China, more clearance action to reduce high inventory levels and almost total costs.”

“The market environment changed in early September as consumer demand weakened in Western markets and traffic trends in Greater China further deteriorated,” Adidas CFO Harm Ohlmeyer said in a statement.

“As a result, we saw significant inventory build-up across the industry, leading to higher promotional activity for the rest of the year, which will weigh heavily on our revenue.”

Ohlmeier said the company was “encouraged” by the “remarkable” enthusiasm in the build-up to the FIFA World Cup in Qatar later this month.

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