It only took one lost, or rather broken, contract for the German equipment manufacturer Adidas to find itself in the red. In a press release, the new managing director, Bjorn Gulden, announced Thursday operating losses for the three-stripe brand. A first for thirty-one years. “The numbers speak for themselves. We are not currently operating as we should, lamented the CEO. I am convinced that over time we will make Adidas shine again. But we need time.”
“The sports equipment manufacturer issued its fourth profit warning since July at the close of the stock market, warning investors that it could end its financial year with operating losses of 700 million euros if it did not succeed. to resell its stocks of Yeezy sneakers”, notes the economic newspaper FinancialTimes. “The shares plunged up to 13% on Friday”, observes for his part Bloomberg.
Kanye West in question
The “Yeezy” are futuristic style shoes co-created by Kanye West, the American singer from Chicago, and Adidas. But following several anti-Semitic remarks by the rapper, which caused an international outcry, the brand ceased all collaboration with him in October 2022.
However, the stock of products from this collaboration has not been sold. Adidas is still wondering what to do with them, even if they have been withdrawn from sale for the time being. According to A declaration of the three-stripe brand, the amount of unsold Yeezy products would amount to 1.2 billion euros. As a result, the group could “lose 500 million euros in operating profits this year”, notes the FinancialTimes. The company also expects a business shakeup to cost it an additional €200 million. This could mean that Adidas will suffer an operating loss of 700 million euros in 2023, says the BBC.
In addition to the controversy with Kanye West, Adidas has also suffered from its decision to withdraw from Russia following the invasion of Ukraine, joining a set of global brands that have done the same. The company’s business in China has also been affected by Beijing’s strict zero Covid measures, which have seen the country’s major cities quarantined.
A new CEO to raise the brand?
The new CEO of Adidas, the Finnish Bjorn Gulden, who arrived on January 2, is used to challenges, and big boxes to straighten out. He notably moved to the Danish jeweler Pandora at a time when the company was facing many challenges, or to Puma, when the sports equipment brand was “on its knees” behind its competitors.
So for some market observers, knowing Bjorn Gulden well, the speech given by the Finn in his press release does not ultimately appear so dramatic. “There is hope in this message that says there is an upside to this situation. achieve regular victories”, reports to Bloomberg Thomas Joekel, fund manager at Union Investment in Frankfurt, one of Adidas’ main shareholders. “By doing this, Gulden gives the Adidas staff plenty of time in 2023 to reorganize, refocus, be creative and then perform much better in the years to come,” he continued.