FRANKFURT, Germany (AP) — Adidas’ breakup with the rapper formerly known as Kanye West and the inability to sell his popular Yeezy line of shoes helped batter earnings at the end of last year, leading to a net loss of 513 million euros ($540 million).
The fourth-quarter loss, also attributed to higher supply costs and slumping revenue in China, contrasts with a profit of 213 million euros in the same period a year ago, the German shoe and sportswear maker said Wednesday.
More losses could be ahead as the company forecast a 500 million-euro hit to earnings this year if it decides not to repurpose the remaining Yeezy products it has in stock. The company is predicting a 2023 operating loss of 700 million euros.
Adidas split with Ye in October following the rapper’s antisemitic remarks on social media and in interviews, facing pressure along with other brands to end ties. The company is now grappling to find ways to replace its banner Yeezy line, which analysts have said amounted to as much as 15% of its net income.
CEO Bjorn Gulden said in a statement that 2023 would be “a transition year” and “we can then start to build a profitable business again in 2024.”
Fourth-quarter net sales were up a bare 1.3% at 5.21 billion euros from the same quarter a year ago, held back by around 600 million euros in lost revenue by the decision to halt the partnership with Ye.
The company also cited a revenue drop in China of about 50% and higher costs for supplies and shipping, which could not be offset by higher prices.
For the full year, the Herzogenaurach, Germany-based company said it made net profit of 638 million euros on sales that rose 6%, to 22.5 billion euros.
The company also said it would be replacing its top sales and marketing executives. Global sales head Roland Auschel will leave the company after 33 years and be succeeded by Arthur Hoeld, now head of the Europe, Middle East and Africa region.
Brian Grevy, head of global brands, will step down March 31. CEO Gulden will take responsibility for his product and marketing activities.