Adidas said Wednesday that it was still deciding what to do with its massive inventory of Kanye West’s Yeezy items after its association with the controversial artist ended.
The business warned in reporting its 2022 full-year results that not selling the garments and shoes associated with West might result in a revenue loss of 1.2 billion euros ($1.3 billion).
Adidas ended its partnership with West — now formally known as Ye — in October after he made a string of anti-Semitic comments.
As a result, the group ceased production of the hugely successful Yeezy line created in collaboration with West.
“Should the company irrevocably decide not to repurpose any of the existing Yeezy product going forward,” it would have to write-off the entire inventory, it said.
According to the corporation, this would reduce its operational profit by 500 million euros in 2023.
Adidas predicted a 700 million euro operational loss in 2023, in addition to one-time charges of 200 million euros due to a business strategic review.
Bjorn Gulden, the group’s new chief executive, said the corporation will utilize 2023 as a “transition year to create the base for 2024 and 2025”.
“We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024,” he said.
Next year was shaping up to be a key one for sporting apparel companies, with both the European football championships and the Olympic Games taking place.
Adidas on Wednesday also said net profit fell heavily by 83 percent to 254 million euros in 2022, confirming preliminary results released in February.
Besides its woes over the Yeezy line, it was also facing “elevated recession risks in Europe and North America as well as uncertainty around the recovery in Greater China”.
“The company’s revenue development will also be impacted by the initiatives to significantly reduce high inventory levels,” it added.