Investors have pulled away from Adidas after the sneaker giant is predicting to make a €700m (£623m) loss for the year, as its deals with the fallout from dropping Kanye West’s lucrative deal.
Shares in the company fell 2.48 per cent on Wednesday morning after Adidas revealed in its final year results that it had reduced its operating margins by three per cent for the year ending 2022.
The fall in earnings was largely fuelled by the brand’s decision to cut ties with Kanye West, after the American rapper was kicked off all major social media platforms for posting anitsemtic comments.
Previously, West helped Adidas generate some £1.6bn in sales through his ‘Yeezy’ trainer and clothing line.
Adidas said it expects to make a €500m (£445m) loss from “potentially” not selling his stock.
The trainer seller also said its gross margin declined by 47.3 per cent due to a strong increase in supply chain costs and discounting.
Bjørn Gulden, chief executive of Adidas, said that 2023 would be a “transition year” for the brand to “build the base for 2024 and 2025”.
As a result of heavy supply chain costs and a end of the relationship with the rapper adidas has slashed its dividend from 0.62 pence from 2.94 pence.
Gulden continued: “We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024. 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. We will work on strengthening our people and the Adidas culture.