Adidas posts first loss in 30 years but sticks to dividend

Adidas merchandise is seen in an Adidas store on the day the German company terminated its partnership with the American rapper and designer Kanye West, now known as Ye, in Garden City, New York, U.S., Oct 25, 2022. REUTERS/Shannon Stapleton/File photo

HERZOGENAURACH, Germany — German sportswear giant Adidas posted its first loss in more than 30 years in 2023 on Wednesday as CEO Bjorn Gulden works to turn the brand around after a messy break-up with rapper Kanye West.

Adidas has been battling to right itself after it cut ties with West in October 2022, suspending sales of the highly profitable Yeezy sneaker line.

In Gulden’s first year in the role, he resumed sales of Yeezy sneakers to clear remaining stock while seeking to boost popular products like Samba and Gazelle shoes, and improve relationships with retailers. Shares in Adidas have staged a recovery, outperforming Nike and Puma since he took over.

“Although by far not good enough, 2023 ended better than what I had expected at the beginning of the year,” Gulden said.

Adidas said it expects its underlying business – excluding Yeezy – to improve in 2024, with double-digit growth in the second half. Shares in Adidas were flat at the open.

READ: Adidas ends Kanye West partnership over antisemitism, hate speech

It said its board would propose an unchanged dividend of 0.70 euros ($0.7650) per share on its 2023 performance despite posting a net loss of 58 million euros, its first since 1992.

Clawing back market share

Adidas is gambling that it can claw back market share from rivals even as consumers’ overall appetite for sportswear declines.

Nike last month said it would cut 2 percent of its total workforce, or more than 1,600 jobs, to reduce costs as demand weakens.

Adidas has benefited from a trend for low-rise suede “terrace” sneakers like the Samba and Gazelle, and last year ramped up production. That trend helped footwear sales grow by 8 percent in the fourth quarter, while apparel sales fell 13 percent.

READ: Adidas stuck with $500 million worth of Yeezy sneakers after split with Kanye West

“Things have clearly been going in the right direction at Adidas since Bjorn Gulden took over,” said Thomas Joekel, portfolio manager at Union Investment. “Brand heat is increasing, which can also be seen from the fact that fewer products now have to be sold at a discount.”

Sales falling in North America

Adidas sees sales this year falling in North America, its second-biggest market, saying overstocks remain high. In China it expects a stronger recovery, with sales growing at a double-digit rate after an 8-percent increase in 2023.

Adidas last month set expectations low for its remaining Yeezy products, saying it would sell the sneakers “at least at cost”. It launched its latest drop on Feb. 26, but demand for the shoes is difficult to predict.

The Yeezy sales are “still a little bit of a wild card,” said Cristina Fernandez, analyst at Telsey Advisory Group, despite the company managing the sales successfully so far.

Adidas made 750 million euros in revenue from Yeezy sales last year, resulting in a 300 million euro profit. The company set aside 140 million euros for donations to charities fighting antisemitism and racism.

($1 = 0.9151 euros)