Adidas says it plans to sell its remaining Yeezy inventory at cost

By Steve Goldstein

Sportswear maker Adidas on Wednesday said it plans to sell its remaining Yeezy inventory at cost, as it forecasts a near doubling of its operating profit this year.

Adidas CEO Bjorn Gulden highlighted the company's nearly-steady revenue for 2023 despite the Yeezy overhang and what he called "a very conservative sell-in" strategy.

Adidas had already reported preliminary full-year figures, and on Wednesday it said operating profit fell 60% to EUR268 million ($293 million) on a 5% revenue decline to EUR21.43 billion. It also in late January forecast an operating profit of around EUR500 million for 2024 on mid single digit sales growth when adjusted for currency, a forecast it reiterated.

Gulden said it's seen "some growth" in the first quarter but expects growth to be stronger in the second half of the year.

Yeezy apparel was produced in collaboration with the rapper Ye, formerly called Kanye West, whose relationship with Adidas was severed in 2022 after he made antisemitic comments.

Adidas said sales of Yeezy product contributed around EUR300 million in operating profit in 2023, though it also made donations, and took accruals for further donations, amounting to EUR140 million, and took a "low-double-digit" million euro write-off of Yeezy inventory. A strategic review led to a one-off cost of EUR200 million.

"The ongoing Yeezy drop is set to be sold at cost but it is unclear the retail prices reflect just the cost of goods sold. [Fiscal 2024] is another transition year and the ongoing positive earnings momentum is important despite the dramatically lower base than we thought coming into the year. All eyes are on the future prize and the building blocks to get there," said Adam Cochrane, an analyst at Deutsche Bank.

Adidas shares (XE:ADS) fell 1% but have climbed 35% over the last 52 weeks.

-Steve Goldstein

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03-13-24 0544ET

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