German apparel giant Adidas suffered heavy losses for Q4 2022 and looks to rebuild its business model throughout 2023.
Adidas AG recently released its Q4 2022 financial report, which revealed heavy losses sustained on several tiers. For the fourth quarter of last year, the German apparel giant suffered an operating loss of 724 million euros. In addition, the Bavaria-based multinational corporation also sustained a 482-million-euro net loss from continuing operations.
Following the abysmal Q4 2022 performance, Adidas slashed its dividend and warned of its first annual loss in thirty-one years. During the last quarter, the apparel powerhouse terminated its extremely lucrative partnership with Ye, formerly Kanye West. Last October, the Adidas-Ye deal severance came after the controversial rap star and business mogul made several antisemitic comments.
Adidas currently projects a full-year operating loss of 700 million euros for 2023, including a 500 million euro potential Yeezy inventory write-off. Furthermore, the company’s full-year operating loss estimation also includes a substantial 200 million euros in “one-off costs.”
Adidas could recommend a dividend of 70 euro cents per share at its upcoming May general meeting. This development marks a sizable reduction from the 3.30 euros per share the shoes and clothing designer had in 2021.
For the fourth quarter of 2022, Adidas also saw its currency-neutral revenues decline by 1% following its termination of the Yeezy deal. According to the company, its currency-neutral revenue would reduce further at a high-single-digit rate throughout 2023.
Adidas CEO Comments on Underwhelming Q4 2022 Performance
New Adidas CEO Bjørn Gulden, who succeeded Kasper Rørsted at the beginning of the year, spoke on the disappointing figures. Describing 2023 as a “transition year,” Gulden explained that the company seeks to return to profitability next year. According to him, Adidas will try to reduce inventories, as well as discounts, in 2023 en route to re-establishing itself in 2024. As Gulden put it:
“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.”
Gulden also identified concerted staff efforts as a vital catalyst for rebuilding Adidas’ business model. In the chief executive’s own words:
“Motivated people and a strong Adidas culture are the most important factors to build a unique Adidas business model again. A business model built to focus on serving our consumer through both wholesale and DTC, that balances global direction with local needs that is fast and agile, and of course, always invests in sports and culture to keep building credibility and brand heat.”
Adidas terminated its relationship with Ye’s Yeezy brand last October as a show of disapproval against racial abuse. At the time, the apparel giant said it did not “tolerate antisemitism and any other sort of hate speech.”
In November, Adidas launched an investigation into alleged sexual misconduct by Ye displayed toward staff. The investigation came on the heels of a Rolling Stone publication that claimed the controversial rapper used sexual antics on employees. These antics included lewd and inappropriate behavior and sexually charged foul language. In addition, allegations against Ye stated that he showed hardcore pornographic material to Adidas/Yeezy staff at meetings.
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