Adidas has today lowered its full-year guidance, after the sportswear giant recently terminated its partnership with Kanye West’s Yeezy brand.
The company formally ended its relationship with the Yeezy brand on 25 October after the musician launched several offensive and antisemitic tirades on social media and in interviews.
Adidas now anticipates a net income from continuing operations of around €250 million ($251.56 million), down from a target of around €500 million stated on 20 October.
The company now expects currency-neutral revenues for low single-digit growth in 2022, with gross margin now expected to come in at around 47% for the year.
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Adidas reported a 4% year-on-year increase in currency-neutral sales in the third quarter, with double-digit growth in ecommerce in the EMEA, North America and Latin America regions.
However, gross margin declined by 1% to 49.1% on the back of “higher supply chain costs, higher discounting, and an unfavorable market mix,” it said.
Operating profit also came in at €564 million. Net income from continuing operations of €66 million, down from €479 million last year, was “negatively impacted by several one-off costs totalling almost 300 million as well as extraordinary tax effects in Q3,” Adidas said.
“This amount differs from the preliminary figure published on October 20, 2022, due to negative tax implications in the third quarter related to the company’s decision to terminate the adidas Yeezy partnership. This negative tax effect will be fully compensated by a positive tax effect of similar size in Q4,” Adidas said.
In addition, the company has reduced its full-year guidance on October 20, as a result of “further deterioration of traffic trends in Greater China, higher clearance activity to reduce elevated inventory levels as well as total one-off costs of around 500 million euros.”
“The market environment shifted at the beginning of September as consumer demand in Western markets slowed and traffic trends in Greater China further deteriorated,” Adidas chief financial officer Harm Ohlmeyer said in a statement.
“As a result, we saw a significant inventory buildup across the industry, leading to higher promotional activity during the remainder of the year which will increasingly weigh on our earnings.”
