In a press release on Feb. 9, Adidas warn of considerably lower revenues in 2023. If Adidas decides not to repurpose Yeezy prduct, 2023 could see an operating loss as low as €700 million.
Early indications of 2022 results released
Preliminary unaudited 2022 results show a 66 percent decline in annual operating profit to €669 million, down from €1,986 million in the previous year, pushing the operating margin down to 3.0 percent from 9.4 percent in 2021.
Net income from continuing operations dropped by 83 percent to €254 million from €1,492 million in 2021. Annual gross margin slid by 340 basis points to 47.3 percent from 50.7 percent. FY22 total revenues rose 6 percent in reported terms (1% in constant-currency) to €22,511 million from €21,234 million.
“The numbers speak for themselves” says CEO
“The numbers speak for themselves. We are currently not performing the way we should,” said Adidas CEO Bjorn Gulden in a prepared statement. “2023 will be a year of transition to set the base to again be a growing and profitable company. We will put full focus on the consumer, our athletes, our retail partners and our adidas employees.” Gulden added: “We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again. But we need some time.”
Yeezy could still be a stumbling block
But there are roadblocks on the FY23 horizon for the group, namely how it utilizes existing Yeezy inventory.
In October 2022, Adidas ceased its partnership with rapper and fashion designer Kanye West, also known as Ye, and his Yeezy brand, following publically-made antisemetic remarks from West.
If Adidas opts against selling exsisting Yeezy inventory, revenues will decline by approximately €1.2 billion and operating profit will fall by an estimated €500 million. Against these parameters, the company is forecasting a high-single digit drop in currency-neutral sales in FY23 and a “break-even” operating profit.
Adidas is currently conducting a strategic review aimed at “re-igniting profitable growth” in 2024, but it will take a larger hit to its FY23 operating profit target if it decides against repurposing any of its existing Yeezy merchandise. That scenario would lower the company’s operating profit by an additional €500 million this year and coupled with an expected €200 million in one-time costs would result in an annual operating loss of some €700 million this year.
