Shares of Adidas were on the rise in early morning trading on Tuesday following the announcement that the sports apparel giant’s projected losses for 2023 would not be as severe as initially anticipated. This positive development comes after Adidas successfully sold a portion of its $1.3 billion inventory of Yeezy sneakers, which were associated with its now-canceled partnership with rapper Ye (formerly known as Kanye West).
Revised projections now indicate an operating loss of $499 million for 2023, down from the previously forecasted $776 million. Additionally, Adidas anticipates writing off approximately $443 million for its remaining Yeezy inventory, which is lower than the previous estimate. The company further noted that additional sales of Yeezy inventory could contribute to even better financial results.
In addition to this optimistic news about its 2023 losses, Adidas also reported that its second-quarter results exceeded expectations. While revenue experienced a 5% drop, it still surpassed analysts’ forecasts. Moreover, the gross margin for the quarter increased to 50.9% compared to 50.3% in the previous year.
The termination of Adidas’ partnership with Ye in October resulted from a series of anti-Semitic remarks and actions that the company deemed “unacceptable, hateful, and dangerous.” This decision raised concerns about the fate of the remaining unsold Yeezy-branded sneakers.
In May, Adidas announced plans to sell a portion of its Yeezy inventory and pledged to donate a significant portion of the proceeds to organizations fighting hate speech. However, the company could not be reached for comment regarding these recent developments.
Apart from Adidas, other companies such as Balenciaga, Gap, and Foot Locker also ended their associations with Kanye West. It is worth noting that West asserted he had ceased working with Gap independently.
In light of these changes, Adidas has adjusted its full-year guidance. The company now anticipates a mid-single-digit drop in revenue for 2023, instead of the previously projected high-single-digit decline. CEO Bjorn Gulden expressed optimism about increasing demand from China and emphasized the importance of capitalizing on the popularity of their Samba sneakers.
