2023-08-03 14:07:25
The sale by Adidas of a first batch, from its stock of sneakers produced with rapper Kanye West, generated around 400 million euros in revenue.
The sports equipment manufacturer Adidas has started to turn the page on its brutal break with Kanye West by selling a first stock of sneakers produced with the rapper, the sale of which should allow the German group to reduce the expected annual loss. Adidas even posted a net profit attributable to shareholders of 84 million euros in the second quarter, following two consecutive quarterly losses, according to results released on Thursday. Over one year, however, this profit fell by 71% compared to the second quarter of 2022.
The three-stripe brand has been going through a rocky period since it called off its collaboration with the American rapper, now known as Ye, in October following a series of anti-Semitic slip-ups by the star. The cessation of the marketing of the lucrative Yeezy sneakers designed with Kanye West had precipitated the group into the red at the end of 2022 and the beginning of 2023. Adidas was also struggling with difficulties in the Chinese market, for a long time one of its locomotives. The situation is improving on both fronts.
Reduction of losses in 2023
Adidas sold, at the end of May, part of the stocks of Yeezy that it had withdrawn from the shelves. Demand for the controversy-splattered sneakers has been strong, generating around 400 million euros in revenue, the group said on Thursday. Only part of the sum goes to the manufacturer. Adidas said on Thursday that it had reserved, as announced, 110 million euros for associations fighting once morest racism and anti-Semitism, of which 10 million have already been paid. The amount of royalties planned for Kanye West has not been specified.
The sale of this first batch contributed regarding 150 million euros of the 176 million euros in second-quarter operating profit, according to the company. This operation also allowed the Bavarian group to reduce its operating loss forecast (Ebit) for the year, now expected at 450 million euros, once morest 700 million euros anticipated before. It contributed to stable revenues in the second quarter year-on-year, excluding exchange rate developments. Calculated in euros, turnover over the period fell over one year by 5% to 5.34 billion euros.
“The sale of the first part of the Yeezy inventory has of course contributed to our revenue for the quarter,” acknowledged Adidas CEO Bjorn Gulden, quoted in the press release.
Caution on activity in North America, Europe and China
In China, where sales had fallen by a third in 2022 in particular due to sanitary blockages, activity seems to be picking up once more with a 16% increase in turnover in the second quarter. “We are seeing a positive trend in the Chinese market,” observed the CEO who took over the group at the start of the year, in the midst of a storm. But conditions are tough in North America, where inflation is holding back buyers and sales fell 16% in the quarter. Caution is in order for the rest of the year, according to the group: “the high risks of recession in North America and Europe persist, as does the uncertainty surrounding the recovery in China”.
Caution also on the continuation of Yeezy sales: a second batch of the abundant stock has been offered to fans since this week and Adidas plans to renew the operation until the sneakers run out. But the next sales will not necessarily be as lucrative, given the type of products offered, group leaders said on Thursday. It took several months of brainstorming for Adidas to decide what to do with the millions of sneakers pulled from the shelves, equivalent to 1.2 billion in sales, with outright destruction considered.
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