The 2021-2022 period was disastrous for the brand adidas. The company reported that its net profit fell 83% in the fiscal year.
Harm Ohlmeyer, Adidas’ chief financial officer, attributed the losses to three key factors:
- The breaking of the alliance with the rapper Yeformerly known as Kanye West.
- The departure of the brand and the closure of its stores in Russia due to the conflict with Ukraine.
- Drop in sales in China due to Covid lockdowns.
“If you lose three groups of earnings in a year, that leaves some scars,” the company’s new CEO, Bjørn Gulden, said in a call to his investors on Wednesday.
The 3 blows to Adidas
First hit: Goodbye Yeezy
As reported The Wall Street JournalAdidas stopped producing yeezy, the collection he made in collaboration with the rapper. The line was wildly popular and sold out in a matter of minutes. However, the company cut ties with Ye over his anti-Semitic remarks in October 2022.
“Ye’s recent comments and actions have been unacceptable, hateful and dangerous, and violate the company’s values of diversity and inclusion, mutual respect and fairness,” Adidas said in a statement at the time.
Yeezy accounted for 8% of the company’s sales in 2021 and according to Gulden, Adidas still doesn’t know what to do with the brand’s unsold stock.
Second blow: Exit from Russia
The company, based in Germany, decided close their stores in Russia after the invasion of Ukraine in early 2022. The company suspended operations in March in the eastern giant, where it had around 500 stores that accounted for around 2% of its global revenue.
Strike Three: Blockades in China
The third factor, and probably the most significant, that affected Adidas’ profits were the blockades of sales and in its supply chain in China due to strict Covid-19 restrictions. This represented a 36% drop in sales in the Asian giant.
For these reasons, Adidas has a $6 billion excess inventory which caused discounts on merchandise. In fact, Gulden warned that the company will order millions less in inventory this year to improve merchandise movement.
“2023 will be a year of transition to build the foundation for 2024 and 2025,” warned the CEO of Adidas.
Editorial Team The editorial team of EMPRENDEDOR.com, which for more than 27 years has worked to promote entrepreneurship.