Adidas on Tuesday raised its full-year guidance — and the company said that results have once again been “positively impacted” by its decision to start selling Yeezy merchandise again after it parted with Yeezy founder Kanye West and his brand last October in light of repeated antisemitic statements.
The German sportswear retailer reported preliminary results for the third quarter, noting that the underlying Adidas business also saw improvements in the quarter. Revenues in the third quarter declined 6 percent to 5.999 billion euros, or $6.35 billion. Gross margin improved 0.2 percentage points to 49.3 percent. Operating profit was 409 million euros, for an operating margin of 6.8 percent.
Including the impact of recent Yeezy sales in the two drops that occurred in Q2 and Q3, Adidas said it now expects loss related to Yeezy inventory to cost the company closer to 300 million euros, down from the previously outlined 500 million euros. Total one-off costs this year are still expected to total 200 million euros, as previously expected, which translates to a total projected operating loss of 100 million euros in 2023, down from the previously expected 450 million euros.
Since Adidas announced a decision to begin selling some Yeezy inventory, the company carried out two major drops of Yeezy product in May and August. Adidas said it would donate a “significant” portion of proceeds from these sales to organizations representing people who “were hurt” by Kanye West’s comments.
Adidas’ announcement to resume Yeezy sales came after the company weighed a variety of options for what to do with the leftover $1.3 billion (or 1.2 billion euros) worth of Yeezy product, which was projected to yield a potential 500 million euros (or $537 million) hit to operating profit. In light of recent sales, this cost has been cut down significantly.
For the full-year of 2023, Adidas now expects currency neutral revenues to decline at a low-single-digit rate, up from a previously issued guidance that saw revenues declining at a mid- single-digit rate. Underlying operating profit, which includes one-offs relate to Yeezy and a broader strategic review, is expected to land around 100 million euros, compared to a previously estimated projection to break even.
In August, the German sportswear retailer said it has no plans to sell more Yeezy shoes when the current stockpile dissipates.
“To take [Kanye West’s] designs and sell them off later, which technically we could do, is not part of our strategy,” said Adidas CEO Bjørn Gulden in a call with analysts. “Our task is to limit the damage, get rid of the inventory and then build the business later without Yeezy.”
