Adidas cuts profit forecast after ending Yeezy partnership

Published Wed, Nov 9, 2022 · 04:28 PM

ADIDAS slashed its profit forecast for the third time since July, after ending its partnership with rapper Ye and discontinuing the lucrative Yeezy line of sneakers.

The German company now expects currency-neutral revenue for the year to grow at a low-single-digit rate, down from a previous mid-single-digit target. It also trimmed its forecast for this year’s operating margin to 2.5 per cent, from 4 per cent.

The lower targets reflect the company’s decision last month to end its collaboration with the rapper and designer, formerly known as Kanye West, following a string of offensive and anti-Semitic remarks. Analysts said the Yeezy line accounted for about half of Adidas total profits.

The sneaker-maker announced Tuesday (Nov 9) that Bjorn Gulden will take over as chief executive officer in January. He formerly held the same role at rival Puma. The company is seeking to revive its fortunes amid a panoply of challenges. Sales in China, once Adidas’ biggest bright spot, are down by about a third through September, amid consumer boycotts of Western brands.

Demand in Western markets has also begun to slow, as consumers feel the impact of surging inflation, and concerns grow about a potential recession. This has created a situation where unsold goods are piling up.

Adidas is hoping the World Cup soccer tournament, which starts this month, will provide a boost. Traditionally, the event has led to a surge in sales of jerseys and soccer gear, though the unusual timing of this year’s event – late autumn in the Northern Hemisphere, has so far limited the excitement. BLOOMBERG

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