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Adidas Cuts Guidance as It Grapples With Losing Yeezy Business

Adidas once again cut its full-year guidance on Wednesday, as the German sportswear company grapples with the loss of its Yeezy business.

In the third quarter, Adidas reported a 4% growth in currency-neutral sales. Net income from continuing operations was 66 million euros, reflecting 300 million euros in one-off costs that negatively impacted business in Q3.

In late October, Adidas said it would cut ties with Kanye “Ye” West, the founder of the Yeezy brand, and end one of its most successful shoe partnerships worth an estimated 10% of Adidas’ total revenues. This decision has prompted Adidas to once again lower its outlook for the remainder of the fiscal year to reflect the loss of Yeezy sales, which are typically strong in the fourth quarter.

Adidas now expects currency-neutral revenues for the total company to grow at a low-single-digit rate in 2022. Net income from continuing operations is expected to reach a level of about € 250 million.

Adidas previously downgraded its outlook in October, citing a traffic slowdown in Greater China, more promotional activity due to high inventory levels and other one-off costs. Adidas also rolled out a “business improvement program” which will include “several initiatives aimed at mitigating the significant cost increases resulting from the inflationary pressure across the company’s value chain as well as unfavorable currency movements,” Adidas said.

Adidas CFO Harm Ohlmeyer said in a statement that a demand slowdown in Western markets and Greater China at the start of September has weighed on its earnings, but said the brand is “encouraged by the enthusiasm for the upcoming FIFA World Cup which is already noticeable in our Football revenue growth.”

Adidas is also banking on its new CEO to help it overcome current obstacles. The company on Tuesday announced that Puma chief Bjørn Gulden will serve as its new CEO, effective Jan. 1, 2023. Gulden, who announced his departure from Puma on Friday, succeeds Kasper Rorsted, who served as CEO of Adidas since 2016.

Even before Bjorn’s appointment was confirmed, analysts were upbeat about the new hire’s potential to guide Adidas’ business as it grapples with challenges. While at Puma, Gulden helped lift the company’s annual sales by 5.3 billion euros from fiscal year 2014 through 2022.

Baird analyst Jonathan Komp said in a Wednesday note that this CEO transition can “continue to support improved sentiment” for Adidas.

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