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Adidas has posted its first loss in more than three decades following the financial blow from abandoning its deal with the rapper Kanye West.
The group reported a loss of €58m (£50m) in 2023 compared with €254m (£217m) profit in the prior year.
The company also reported a 5% decrease in revenues to €21.4bn (£18.3bn), with the discontinuation of its Yeezy line causing a drag of around €500m (£427m).
Additionally, its operating profit declined from €669m (571.2m) in 2022 to €268m (£228.8m) in 2023.
Adidas ended its working partnership with rapper Kanye West, saying it “does not tolerate antisemitism”, after West published offensive posts on his Instagram and Twitter accounts in October 2022.
Since terminating the Yeezy partnership in October, Adidas has explored multiple scenarios for the potential use of the existing Yeezy inventory.
In May 2023, the group reached an agreement with the rapper to sell some of its outstanding Yeezy inventory because destroying it would force the company to write off another €500m (£431.8m).
All proceeds have been donated to selected organisations working to combat discrimination and hate, including racism and antisemitism.
Looking ahead, the group expects currency-neutral sales to grow at a mid-single-digit rate in 2024. This top-line guidance assumes that Adidas will sell the remaining Yeezy inventory at cost, which would result in sales of around €250m (£213.4m) in 2024.
Bjørn Gulden, CEO of Adidas, said: “Despite losing a lot of Yeezy revenue and a very conservative sell-in strategy, we managed to have flat revenues. We expected to have a substantial negative operating result, but achieved an operating profit of €268m. With a very disciplined go-to-market and buying process, we reduced our inventories by almost €1.5bn. With the exception of the US, we now have healthy inventories everywhere.
“The product for 2024 is good, our new marketing campaigns for both Originals and in Performance will continue to strengthen the brand. Our Sportswear business with clear takedown strategies will strengthen the distribution in the commercial channels in both wholesale and DTC.”
Gulden added: “We should see some growth already in Q1, but I expect growth to be stronger in the second half of the year. We still have a lot of work to do, but I feel very confident we are on the right track. We will bring Adidas back again.”
