Shares of Adidas were climbing after the sports apparel maker said its 2023 losses wouldn’t be as bad as initially thought after selling some of the $1.3 billion in inventory it has of its Yeezy line of sneakers.
American depositary receipts of Adidas (ticker: ADDYY) were up 5.5% in premarket trading Tuesday, and closed up 1.5% at $99.76. Shares are up 47% so far this year.
The shoe line was associated with
Adidas’s
now-canceled partnership with the rapper Ye, formerly known as Kanye West.
Adidas now sees a 2023 operating loss of $499 million, instead of an earlier forecast of $776 million. It expects a potential write-off of $443 million for its remaining Yeezy inventory, also lower than its previous forecast. More Yeezy inventory sales could improve results further, Adidas said.
The German apparel maker also said second-quarter results were better than expected. Revenue dropped 5% but beat analysts’ forecasts. Gross margin for the quarter climbed to 50.9%, from 50.3% in 2022.
Adidas severed its partnership with Ye in October, citing a string of anti-Semitic comments and actions it called “unacceptable, hateful and dangerous,” leaving questions about what it would do with its unsold Yeezy-branded sneakers.
Adidas said in May it would sell some of the inventory and share “a significant amount” of the proceeds with groups fighting hate speech.
Adidas spokesperson Stefan Pursche told Barron’s in an email that “a significant amount from the Yeezy proceeds will be donated to selected organizations working to combat discrimination and hate, including racism and antisemitism. These include but are not limited to the Anti-Defamation League (ADL) and the Philonise & Keeta Floyd Institute for Social Change.”
Balenciaga, Gap (GPS), and
Foot Locker
(FL) also cut ties with West, though Ye said he stopped working with Gap.
Adidas updated its full-year guidance, saying it now expects revenue to drop at a mid-single-digit rate in 2023, rather than at a high-single-digit rate. CEO Bjorn Gulden said he is optimistic about increasing demand from China and about making more of its Samba sneakers.
Write to Janet H. Cho at [email protected]
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