Adidas profits fall 1% to £9.45bn amid Yeezy split

Adidas has reported that its FY gross profit declined 1% to £9.45bn, down from the £9.54bn it made in 2021, according to its financial for the period ending 31 December 2022.

The company stated that its revenue was impacted by the termination of Yeezy partnership with Kanye West.

Adidas’ EBITDA also fell to £1.6bn, down 39% from the previous year and also saw its operating profits drop 66% to £596.32m.

It also reported that the gross margin declined to 47.3% because of significantly higher supply chain costs as well as the strong increase in promotional activity

In 2023, Adidas said it expects currency-neutral revenues to decline at a high-single-digit rate as “macroeconomic challenges and geopolitical tensions persist”.

In addition, while the company continues to review future options for the utilisation of its Yeezy inventory, the guidance already reflects the revenue loss of around €1.2bn (£1bn) from potentially not selling the existing stock.

Accounting for the corresponding negative operating profit impact of around €500m (£444m), the company’s underlying operating profit is projected to be around the break-even level in 2023.

Bjørn Gulden, CEO of Adidas, said: “2023 will be a transition year to build the base for 2024 and 2025. We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024.

“Adidas has all the ingredients to be successful. But we need to put our focus back on our core: product, consumers, retail partners, and athletes. We will work on strengthening our people and the adidas culture. Motivated people and a strong adidas culture are the most important factors to build a unique adidas business model again.”