Adidas share price in major trouble after ending its relation with Kanye West in 2022 – – Our News, Your Views

Adidas share price in major trouble after ending its relation with Kanye West in 2022

Image source: Fox

Shares of Adidas plunged as much as 12.6% today after the sporting goods maker warned it could plunge into a loss this year for the first time in 30 years in the latest downgrade prompted by the split from Kanye West.

The rapper and designer’s Yeezy brand inventory, with runners price tags as high as $700 a pair, could be wiped out entirely, resulting in a $700 million loss this year.

Failure to sell the stock alone would see revenue drop by €1.2 billion in 2023, while operating profit would fall by around €500 million to breakeven, the Nike rival added.

“The numbers speak for themselves. We are currently not performing the way we should,” said CEO Bjorn Gulden, who joined Adidas on January 1 after switching from rival brand Puma, reports RTE.

In his fourth profit alert in less than six months, he forecast a high-single-digit percentage decline in sales this year.

On average, analysts had expected sales to grow 4% in constant currency in 2023 and operating profit to reach 1.02 billion euros, according to data on Adidas’ website.

The news came as Adidas lost its lead with currency-neutral sales rising just 1% in 2022.

Jefferies cut its Adidas stock recommendation to hold off on buying, citing “challenges in articulating the mid-term profit delivery”, reports RTR.

Adidas lowered its forecast for 2022 in October to mid-single-digit percentage sales growth and an operating margin of 4% due to weakening demand in China and Western markets, as well as one-time expenses related to the exit from Russia.

However, recent results showed that the company had performed worse than expected, posting an operating margin of 3%.

Full results for 2022 will be released on March 8.

Adidas is conducting a review of its Yeezy products, with an option to save stock by repurposing them under a different brand.

The split came just before the crucial run-up to Christmas, forcing Adidas to halve its 2022 profit outlook to €250m in early November and highlighting the risks some brands have taken by tying their fortunes to celebrity.

“2023 will be a year of transition to set the base to again be a growing and profitable company. We need to put the pieces back together again, but I am convinced that over time we will make Adidas shine again. But we need some time,” Gulden said, adding the company would focus on creating “brand heat”, reports RTE.

Competitor Puma also lost ground today, with shares down about 5%.

UBS analysts said in a note to investors that, given the tone of Gulden’s comments, they expect the Yeezy business to be completely shut down and that it would be a long, drudgery for the new boss.

“While we think CEO Bjørn Gulden is the right person to turn around the brand, we don’t expect initial signs until the second half of 2024,” the note said, reports RTE.

Tell us your thoughts in the Facebook post and share this with your friends.

Share this story with a friend

Share this story

Tell us what you think on our Facebook page