Adidas has reported a loss in the first quarter of 2023, booking a net loss of €39 million ($43 million) from January to March, compared to a profit of €482 million in the same period a year earlier. The loss was due to the end of its highly successful Yeezy line, which was designed in collaboration with rapper Kanye West.
The German sportswear brand suffered a significant loss after ending its partnership with West, following his anti-Semitic outbursts on social media in October 2022. However, despite this loss, the overall sales were not as bad as expected, and Adidas’s share price increased by 7.5% in the afternoon on the Frankfurt Stock Exchange.
The loss of the Yeezy line, along with falling revenues for its lifestyle brands, have hurt Adidas, said the new CEO Bjorn Gulden. However, he did not announce any news on what the company plans to do with its huge stock of Yeezy trainers. Gulden explained that the options are narrowing, but it will take time to find a solution as there are many interested parties.
Adidas had previously announced that it could suffer an operating loss of up to €700 million this year if it decides to write off the value of its entire existing Yeezy inventory. Gulden, who took over the company in January after joining from rival Puma, said that the company needs time to turn around, and 2023 will be a bumpy year with disappointing numbers, where maximizing short-term financial results is not their goal.
The impact of the end of the partnership with West was most clearly felt in North America, where sales plummeted by 20% during the quarter. The company also did not perform well in China, a key market for Adidas, due to lengthy Covid lockdowns.
However, Adidas witnessed gains in Latin America and other parts of the Asia-Pacific. Net sales came in almost flat at €5.28 billion, against market expectations for a fall, and Gulden said that the quarter ended a “little better than we had expected”. He pointed to positive developments in some areas, such as the popularity of its Samba, Gazelle, and Campus trainers.