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Adidas Surges 6% as 2023 Loss Forecast Trimmed Due to Strong Yeezy Inventory Sales

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Adidas Expects Smaller Losses as Yeezy Stock Sales Exceed Expectations

Adidas Trims Operating Loss Forecast

Adidas, the German sportswear giant, announced that it is expecting a significantly smaller operating loss for the year. This comes after the company recorded better-than-expected early sales of its Yeezy stock. Adidas has been offloading the Yeezy stock after cutting ties with Ye, the creator of the Yeezy collection. As a result, the potential write-off from the remaining inventory has been reduced from €500 million to €400 million. The company has also trimmed its operating loss forecast for 2023 from €700 million to €450 million.

Positive Performance in the Underlying Adidas Business

Adidas reported a slight outperformance in its underlying Adidas business, which is a positive sign. Despite the challenges related to the Yeezy collection and the ongoing strategic review, the company still expects its underlying operating profit to roughly break even for the year. This indicates that the core Adidas business is performing well and offsetting the losses from the Yeezy stock.

Termination of Partnership with Ye

Adidas ended its partnership with musician Ye in October 2022 due to a series of offensive and antisemitic comments made by him. The company deemed these comments as "unacceptable, hateful, and dangerous" and decided to stop production of Yeezy branded products and cease all payments to Ye and his companies. This led to the question of what would happen to the existing Yeezy stock.

Sale of Inventory and Donation to Non-Profit Organizations

To address the situation, Adidas announced that it would sell the Yeezy inventory and donate a significant amount of the proceeds to various groups, including the Anti-Defamation League and the Philonise and Keeta Floyd Institute for Social Change. This not only helps Adidas clear its stock but also supports meaningful causes and organizations.

The Impact of the Yeezy Clothing Line

The Yeezy clothing line, which was launched in 2016 under a partnership between Adidas and Kanye West, has been a significant revenue driver for the company. It has brought in nearly $2 billion per year, accounting for 10% of Adidas' total revenue. Despite the end of the partnership, Adidas is confident in the potential of its core business and aims to continue growing and innovating in the sportswear industry.

Conclusion: The Impact of Adidas' Yeezy Stock Sales on New Businesses

Adidas' recent announcement of smaller losses and better-than-expected sales of its Yeezy stock signifies an important lesson for new businesses in the sportswear industry. The termination of the partnership with Ye, the creator of the Yeezy collection, due to offensive and antisemitic comments, could have spelled financial disaster for Adidas. However, the company's strategic move to offload the inventory and donate proceeds to non-profit organizations showcases the importance of swift and proactive decision-making.

For new businesses, this situation highlights the significance of carefully selecting partners who align with the company's values and vision. Adidas' substantial revenue loss from cutting ties with Ye underscores the potential detrimental impact of associating with individuals who may act inappropriately or hold controversial beliefs. It serves as a reminder to thoroughly vet potential partners to prevent reputational damage and financial repercussions.

Furthermore, the success of Adidas' core business in offsetting the losses from the Yeezy stock demonstrates the vital role of having a strong and diversified product portfolio. New businesses should aim to develop multiple revenue streams and not overly rely on partnerships or specific products. This approach can help mitigate risks associated with any potential damage to a single product line or partnership.

Overall, the Adidas-Yeezy saga provides valuable insights for new businesses, emphasizing the importance of maintaining brand integrity, navigating partnerships wisely, and diversifying product offerings. By learning from Adidas' experiences, new businesses can position themselves for long-term success in the ever-evolving sportswear industry.

Article First Published at: https://www.cnbc.com/2023/07/25/adidas-up-6percent-after-trimming-2023-loss-forecast-on-strong-yeezy-sales.html

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