Herzogenaurach, Germany – Revenues at Adidas fell by 1% in the fourth quarter of 2022, with a net operating loss of €782m. Of this, €482m was from continuing operations.
The decline includes the impact of the termination of the company’s Yeezy partnership with Kanye West in October 2022, in the light of the rapper’s antisemitic comments. This cost the company €600m in the quarter, and potentially a further €500m in 2023.
Sales were up 1% in the full year on a currency neutral basis, with increases in all markets except China. It reported double-digit increases for 2022 in both North America and Latin America, and high single digit rises in EMEA.
However, the gross margin fell to 47%, and the operating margin to 3%, in the light of significant increases in both supply chain costs and discounting.
The company is still left with €1.2bn of stock from the Yeezy collaboration, and is contemplating donating all profits from them to charity. It would still have to pay West according to their contract.
In 2023, the company expects revenues to decline at a high single digit rate, with underlying operating profit expected to be at about the break-even level. This reflects a sales loss of about €1.2bn, including the potential losses from writing off the Yeezy inventory.
“2023 will be a transition year to build the base for 2024 and 2025,” said CEO Bjørn Gulden. “We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024.”