Adidas To Cut Dividend 80% After Losing $1.3 Billion Severing Ties With Kanye West

Adidas announced on Wednesday that it would slash its dividend by 79% because severing ties with “Yeezy” designer Kanye West has decimated earnings to the tune of $1.3 billion.

Last month we noted that shares of Adidas AG crashed on the German exchange after it warned that it’s sitting on a $1.3 billion pile of unsold Yeezy products, and were ‘reviewing’ options for utilizing the inventory.

Adidas terminated its partnership with Ye in October, after the rapper formerly known as Kanye West repeatedly made antisemitic comments on social media.

The Yeezy line accounted for 7% of Adidas’ total sales last year according to analysts from S&P Global Ratings.

The sportswear giant added Wednesday that it will have to write off around 500 billion euros ($530 billion) worth of Yeezy sneakers if it can’t find buyers for the inventory it currently holds. It might be forced into “literally burning the shoes,” industry experts told the Washington Post. -Insider

“2023 will be a transition year to build the base for 2024 and 2025,” said Bjørn Gulden, who took over as Adidas’s CEO in January, and promised to rebuild the company’s reputation. “We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024.”

As FT notes, Gulden is disinclined to burn the shoes or give them away, both of which would entail a €500mn write-off. Instead, he suggested selling the trainers and donating the profits to charity.

Backing out Yeezy’s operating profit in 2021 suggests Adidas is starting from margins in mid-single digits. The current year should be one of transition. Dispiritingly, guidance points to negative sales growth as the company pushes inventory out of the door. -FT

“We will bring it back to be the best sports brand in the world once again,” he added.