Todor Kostov's avatar
$7.1m follower assets
Adidas $ADDYY on a path to a first annual loss in 31 years
  • A fourth-quarter operating loss of 724 million euros ($763 million); A net loss from continuing operations of 482 million euros
  • Projecting a full-year operating loss of 700 million euros in 2023 (500 million euros in potential Yeezy inventory write-off and 200 million euros in “one-off costs”)
  • Projected loss of 1.2 billion euros in potential sales from unsold Yeezy stock
  • Target to reduce inventories and lower discounts in order to return to profitability in 2024
  • Recommends a dividend of 70 euro cents per share at its May 11 annual general meeting, down from 3.30 euros per share in 2021

Image upload
Source: Adidas

Joey Hirendernath's avatar
@kostofff might be a bit of a controversial question but in your opinion did Kanye's partnership with adidas benefit or damage the brand?
Todor Kostov's avatar

That's a fair question. In my opinion and without going into the details, such things happen and will continue to happen in the future. No company or brand is insulated against controversy based on different endorsements. For example, Nike $NKE has had numerous similar missteps in the past - Lance Armstrong, Marion Jones, Manny Pacquiao, Michael Vick, Adrian Peterson ...

In this particular case, the short-term pain is evident. More important for the future will be the lessons taken, I hope (not only for Adidas $ADDYY) , and whether or not companies/brands should heavily rely in their growth aspirations on similar type of deals (risk/reward profile).

P.S. A good example here with Nike $NKE is that even the 'Air Jordan' (very important for them) brand does not contribute more than 14%-15% to their overall worldwide sales.

Image upload
Source: Statista; Nike Annual Reports 2016 - 2021
Joey Hirendernath's avatar
@kostofff very true, great example to illustrate your point btw!
Todor Kostov's avatar
@joeyhirendernath Thanks, Joey. 🙂
Todor Kostov's avatar
@joeyhirendernath Just to add how far they went, despite the fact that the Yeezy line acconted for c. 8% - 10% of the overall Adidas $ADDYY sales, it contributed c. 40% to their profits (according to Morgan Stanley analyst Edouard Aubin) ...

Nathan Worden's avatar
@kostofff Great points right here, thanks Todor!
Todor Kostov's avatar
@nathanworden Pleasure is mine!
Dissecting the Markets's avatar
I am surprised that they're doing huge write-downs on the Yeezy brand. Despite Kanye West's controversy, I see people continuing to wear their shoes everywhere. No one minds if other people wear their shoes. People continue to shop for them. The sales expectation should be less because of the controversy but in general, the inventory they already have continues to be in high demand.

Also, it could be that people already spent so much on their shoes that it's better to wear it than let it collect dust.
Todor Kostov's avatar
@dissectmarkets Good thoughts for the Executive Team there to ponder ...



Already have an account?