Strong Yeezy Sales Drive Adidas’ 6% Growth as 2023 Loss Forecast Is Trimmed

German sportswear giant Adidas announced on Monday that it anticipates a significantly reduced operating loss for the year due to better-than-expected early sales of its Yeezy stock. This stock is being offloaded after the company ended its partnership with its creator, Ye.

Following this news, shares of Adidas surged by 6.3% at 10:22 a.m. BST on Tuesday. The potential write-off from remaining inventory has now been lowered to €400 million ($442.5 million) from €500 million, leading to a revised operating loss forecast for 2023 of €450 million, down from €700 million.

Additionally, Adidas reported outperformance in its underlying business and expects to break even in terms of underlying operating profit for the year, excluding one-off costs related to Yeezy and an ongoing strategic review.

In a statement, Adidas mentioned that if future Yeezy releases are successful, they would further enhance the company’s results. This implies that there are plans for further releases of existing inventory.

Adidas terminated its partnership with musician Ye, formerly known as Kanye West, in October 2022 due to his offensive and antisemitic remarks. The company described Ye’s comments as “unacceptable, hateful, and dangerous,” leading to the discontinuation of Yeezy branded products and the termination of all payments to Ye and his companies.

This decision left Adidas with the task of dealing with its existing Yeezy stock. In May, the company announced that it would sell the inventory and donate a significant portion of the proceeds to organizations such as the Anti-Defamation League and the Philonise and Keeta Floyd Institute for Social Change.

Adidas signed a deal in 2016 to manufacture and distribute items from the Yeezy clothing line. The brand has since become a major revenue stream for the company, contributing nearly $2 billion annually, or 10% of its total revenue, according to Morningstar analyst David Swartz.