Adidas Cuts Forecast Following Split With Yeezy

Adidas has cut its forecast for 2022, anticipating its breakup with Yeezy to impact sales.

Credit Suisse analysts pointed out several other factors that pose challenges to Adidas’ business, including elevated inventory, growing competition in China, and declining brand momentum.

In Q3, the turbulent market conditions in China resulted in a 27% cross-country decline in quarterly revenue. Meanwhile, the end of the partnership with Yeezy is expected to reduce annual earnings by half, with net income now expected to be around $252 million in 2022.

“The market environment shifted at the beginning of September as consumer demand in Western markets slowed and traffic trends in Greater China further deteriorated,” Adidas CFO Harm Ohlmeyer said.

“As a result, we saw a significant inventory buildup across the industry, leading to higher promotional activity during the remainder of the year, which will increasingly weigh on our earnings.”

In addition, the company expects one-off costs of around $300 million resulting from its decision to leave Russia and the negative tax impact from canceling the Yeezy partnership, Reuters reported.

Looking ahead, the German sportswear company anticipates currency-neutral growth in the low single digits this year, down from a mid-single-digit rate. Meanwhile, it expects its operating margin to be around 2.5%, down from its previous estimate of 4%.

The company’s stock was down 2.8% after the announcement.

Originally published at https://retailbum.com on November 9, 2022.