Adidas CEO pledges to rebuild bruised brand
By Felicia Nwosu
Bjorn Gulden, the Chief Executive of Adidas has pledged to rebuild the bruised brand after dealing with the fallout of the ended partnership with popular rapper, Kanye West. The global sporting wear label said slashing its 2022 dividend after its split with the artist could push it to its first annual loss in three decades this year.
Gulden reiterated that the leading brand will return to its sports-based roots as new strategies are put in place to recover following the split.
Recall that following the rapper turned fashion mogul’s controversial comments, Adidas cut ties with Ye and his lucrative Yeezy sneaker line. This led Adidas to record a $540M loss due to unsold Yeezy Products.
Gulden said Adidas is still deciding what to do with its stock of unsold Yeezy footwear, while suggesting that burning the shoes poses a sustainability issue. He also maintained that giving them away to charity is complicated due to their resale value, which has surged since the split.
“One option could be for Adidas to donate proceeds from the sale of repurposed Yeezy stock to charity. The split cost Adidas 600 million euros ($632 million) in sales in the fourth quarter of 2022, and Yeezy shoes would have brought in an estimated $1.2 billion in revenue this year. The Yeezy 350 “Zebra” shoes are now selling for between $340 and $360, compared to around $260 four months ago,” he said.
Gulden said ending Yeezy was a decision that predated his taking the helm and it was the right thing to do but added that it was “very sad” as well as it would take time for Adidas to build a new brand that is as influential.
According to him, plugging the gap left by Yeezy will not be easy; one area of growth he pointed to is a trend for “terrace” style sneakers like the Samba, Gazelle, and Spezial. “For the first time in a long, long, time people are lining up to buy an Adi product that is not Yeezy.
The Chief Executive noted that the company needs to refocus on its core business and faces a “transition” year before returning to profit in 2024.
“You will see us investing in more sports because that is the DNA of this company. The company will recommend a dividend of 0.70 euros ($0.7374) per share, down from 3.30 euros a share in 2021, at a 11 May annual general meeting.
The Adidas leader said the company needs to reduce inventory levels and do less discounting.
“Inventories came in at just under 6 billion euros at the end of December, up 49% from the previous year, including 400 million euros of Yeezy products. The company forecast 2023 underlying operating profit at roughly break-even when taking into account the $500 million loss from not selling existing Yeezy stock. If Adidas decides not to repurpose the products, it will write the inventory off altogether, denting profit by another $500 million. That, along with $200 million of one-off costs, would bring Adidas to a $700 million loss this year.”
Although Adidas has not said how much the Yeezy brand has made since its first deal with Ye at the end of 2013, analysts estimate it accounted for as much as 7% of total sales in its best years. Adidas shares were down 2.1% by 12:30 GMT, while stating how they, however, outperformed rivals Puma and Nike since the start of this year, is a sign that investors back Gulden.
RECOMMENDED ARTICLES
Comment
No comments found.