Dive Brief:
- After posting hefty operating and net losses for Q4, Adidas on Wednesday warned of a possible 700 million euro ($738.6 million) operating loss for 2023, which would be its first annual loss in three decades. That includes a potential 500 million euro write-off of unsold Yeezy-branded merchandise and 200 million euros in one-off costs.
- Despite a 482 million euro net loss in Q4, the company posted net income of 254 million euros for the year. Currency-neutral revenues rose 1% for the year, reaching 22.5 million euros, and fell 1% in Q4. The company’s operating profit decreased 66% to 669 million euros in 2022, down from nearly 2 billion euros in 2021.
- Adidas also announced changes to its executive team as new CEO Bjørn Gulden takes over. CFO Harm Ohlmeyer will continue in that position until 2028. Arthur Hoeld will oversee global sales starting April 1, replacing Roland Auschel, who is leaving the company after 33 years. In addition, Brian Grevy, who oversees global brands, is leaving the company effective March 31. Gulden will assume responsibility for global brands.
Dive Insight:
Adidas’ decision to end its partnership with Ye, also known as Kanye West, hurt the company financially. The breakup may affect 2023 profitability too.
In addition to an expected operating loss of more than $700 million, Adidas projected currency-neutral revenues would decline in the high-single digits in 2023. The company’s guidance reflects a revenue loss of about 1.2 billion euros from potentially not selling the existing Yeezy stock. Adidas’ underlying operating profit is projected to break even in 2023.
Adidas last month told Retail Dive it has not decided what to do with the unsold Yeezy inventory.
The breakup with Ye is not the only issue affecting Adidas’ balance sheet. The company said recession risks in North America and Europe, along with geopolitical tensions and the need to “significantly reduce high inventory levels,” will impact revenue in 2023.
The “shockingly bad” guidance, as one analyst described it in February, led both S&P Global Ratings and Moody’s to downgrade the apparel maker’s credit and debt ratings last month.
In an earnings announcement, Gulden restated a sentiment he shared last month: 2023 will be a transition year for the company as it works to rebuild a profitable business. Gulden, who became CEO in January, channeled athletic language to describe how the company will reorient itself after a challenging year, saying the company will work to become “fast and agile.”
In order to become “the best sports brand in the world once again,” Gulden said Adidas will put its focus on its products, consumers, retail partners and athletes by balancing global direction with local needs. The company also reiterated its commitment to serving customers both through wholesale channels and its direct-to-consumer business.
Also a part of that strategy is a revamp of its management team. Hoeld, who is taking over global sales, has been with Adidas for 25 years. He had served as managing director of the company’s Europe, Middle East, and Africa region since 2018. With Gulden taking over responsibility for global brands, as of April 1, the members of Adidas’ new executive board will include Gulden, Hoeld, Ohlmeyer, Amanda Rajkumar (global human resources, people and culture), and Martin Shankland, who will oversee global operations.
