Adidas AG boosted its guidance for a second time in three months after selling another batch of Yeezy sneakers from its canceled partnership with the rapper and designer Ye.
(Bloomberg) — Adidas AG boosted its guidance for a second time in three months after selling another batch of Yeezy sneakers from its canceled partnership with the rapper and designer Ye.
The German sports company now expects to report an operating loss of about €100 million ($106 million) in 2023, it said in a statement Tuesday.
That’s better than the €450 million loss that Adidas forecast in July, which was already an improvement over the company’s initial warning that it might post a €700 million operating loss if it had to write off all existing Yeezy inventory.
The company’s American depositary receipts traded 3.1% higher late Tuesday.
Adidas has carried out two successful drops of Yeezy products since May, and it could see additional boosts from future sales from its inventory heading into the holiday shopping season. Even so, those will probably create a smaller positive impact on earnings than the initial batch from May and June, which generated about €400 million.
Adidas terminated its deal with Yeezy last October after Ye made a series of antisemitic remarks, leaving about €1.2 billion worth of sneakers in limbo.
In May, Adidas decided to begin selling its pile of Yeezy shoes left over from its defunct partnership with Ye, formerly known as Kanye West. The company has pledged to donate a “significant amount” of the proceeds to charities that work to fight discrimination and hate speech.
The potential write-off of remaining Yeezy inventory has now declined to around €300 million from a previous level of €400 million, Adidas said.
The sales are a boost for Adidas as Chief Executive Officer Bjorn Gulden, who took over in January, tries to turn around the company’s fortunes. Adidas is struggling to grow in North America, in part thanks to a huge inventory of unsold footwear and apparel there.
Adidas appears to be regaining momentum in China and is benefiting from strong global demand for its Terrace line of sneakers, which include classics like the Samba and Gazelle.
(Updates with ADRs in fourth paragraph and write-off in eighth paragraph)
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