Adidas has revealed plans for a huge cut to its dividend as it battles the costly fallout from its failed partnership with rapper and fashion designer Kanye West.
The company admitted Wednesday it had yet to decide what to do with a mountain of unsold Yeezy sneakers, the legacy of its split from westfollowing the anti-Semite, and more offensive commentsmade last October.
It had a book value of $500m (£442m) and could, potentially, be written off completely or reused.
Adidas has warned that the problems could push the company to its first annual loss in three decades this year.
It also revealed it will have to pay its former chief executive nearly €16m (£14.25m) after he stepped down from the business prematurely following the end of the partnership and other issues including a perceived reliance on sales in China.
Kasper Rorsted left the German sportswear giant last November, almost four years before the end of his contract.
Chief Executive Bjorn Gulden, who took the reins in early 2023, pledged to rebuild the bruised brand but admitted Adidas faced a “transitional” year with the value of its total inventories at $ 600 million, up nearly half from the same period last year.
He has denied rumors of a deal with West to sell Yeezy inventory.
Shares are down more than 2%.
Full-year sales for 2022 rose 6%, but Chloe Collins, head of apparel at data firm GlobalData, pointed out they remained 4.8% below pre-pandemic levels despite the global sportswear market grew by 9.6% over the three years.
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“In the fourth quarter, despite Adidas’ sponsorship of Argentina’s winning team, the presence of the FIFA Men’s World Cup was not enough to offset the negative impact of the Yeezy controversy on branding or the fact that its designs lag behind rivals Nike and Puma,” he said. she wrote.
“A catastrophic performance in China was partly responsible for Adidas’ performance in fiscal 2022, as further lockdowns and moves to local sportswear brands such as Li-Ning and ANTA caused currency-neutral sales to decline. 35.8%.
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He added: “Adidas is still deciding what to do with its remaining Yeezy inventory, despite reaching a deal with West that allows the brand to sell it.
“It faces a tough choice, as selling the shares could further damage brand perception and not selling it will have a disastrous effect on bottom line.”