The German sportswear giant—adidas—announced on Wednesday that it would reduce its dividends for 2022. The company has also warned that its breakup with rapper and fashion designer Ye — formerly known as Kanye West—could lead to its first annual loss in 30 years.
As a result of this news, adidas’ shares fell 3.1% in early trading.
Meanwhile, adidas is still deciding what to do with its stock of unsold YEEZY footwear inventory after the fallout with Ye cost the company 600 million euros (around R11.7 billion) in sales in the fourth quarter of 2022.
The YEEZY sales would have brought in an estimated €1.2bn (around R22.3bn) in revenue this year.
In a statement on Wednesday, adidas CEO Bjørn Gulden said “2023 will be a transition year to build the base for 2024 and 2025,” as the company looks to reduce inventories and lower discounts in order to return to profitability in 2024.
“Should the company irrevocably decide not to repurpose any of the existing Yeezy product going forward, this would result in the potential write-off of the existing Yeezy inventory and would lower the company’s operating profit by an additional €500 million (around R9.7bn) this year.” the company added.
On the flipside, Bloomberg reports that:
– adidas may sell its YEEZY sneaker inventory and donate the proceeds from the sale of repurposed Yeezy stock to charity, as way to recover the huge financial hit.
– In addition Gulden ruled out other options, such as burning them, giving them away for free in countries such as Turkey and Syria, or rebranding them.
– Gulden rejected the possibility of adidas removing the Yeezy labeling or stitching on the products and then putting them up for sale.
However, if the inventory gets sold, Ye would need to be paid, per the royalty agreement.
The company plans to recommend a dividend of 0.70 euros (around R13.70) per share at its annual general meeting on May 11, down from 3.30 euros (around R64.55) per share in 2021. The share price of Adidas fell by 3.1% in early trading.
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