The task list for the new Adidas CEO is long after a miserable year: getting the China business back into shape, dealing with the aftermath of the separation from scandal rapper Kanye West and reducing the high inventories in core markets. At the annual press conference, however, Björn Gulden made it clear directly what he had gotten himself into at the world's second-largest sporting goods group.
Business correspondent in Munich.
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"2023 will be a transitional year to lay the foundation for 2024 and 2025," the Norwegian said at the press conference. "We need to reduce inventories and reduce discounts. In 2024, we can then start building a profitable business again," said the former Puma boss. Adidas has everything to be successful, it is now about focusing on the core of the business, on products, customers, retail partners and athletes. For the weak past financial year, shareholders are to receive a dividend of only 3.30 euros after previously 0.70 euros.
This year, which had already been announced in a mandatory announcement in mid-February, it will not get better, but even thicker. In the worst case, there will be a deep red minus of 700 million euros at the operational level and in the best case a black zero in the balance sheet.
Yeezy end weighs on balance sheet
It is mainly about the effects of the partnership with the controversial musician West, which Adidas had stopped after his repeated anti-Semitic statements at the end of last year. In the cooperation, Adidas had sold shoes and clothing designed by West under the Yeezy brand, which until then had always generated sales in the billions, as they sometimes cost several hundred euros. The Herzogenaurach-based sporting goods group stopped sales at that time, which is why the important Christmas business failed to materialize and Adidas alone posted 600 million euros less sales in the fourth quarter.
What should happen to the already produced goods, Adidas had not specified in detail and continues to examine various options, as it was said on Wednesday. However, Adidas warned: This year alone, around 1.2 billion euros in sales and about 500 million euros in operating profit would be missing if the inventory goods are not sold. Against this backdrop, Adidas expects revenues to decline by up to 9 percent this year.
Should the group under the new CEO Björn Gulden decide to no longer use the goods, then the products would have to be written off, which would reduce the operating profit by another half a billion euros, it said. In addition, there are one-off costs of up to 200 million euros for a strategic review.
Profit to collapse significantly in 2022
Adidas had already presented the figures for the past year in mid-February. Accordingly, the operating profit collapsed by a good two-thirds to 669 million euros. Net income from continuing operations should reach at least €1.8 billion at the beginning of last year. Of this, only 254 million euros remained. For comparison: Gulden's former employer Puma recorded double-digit growth rates last year and a net result of 354 million euros. Adjusted for currency effects, sales increased marginally to EUR 22.5 billion.
In addition to the terminated partnership with Yeezy, business in China in particular had a negative impact. There, sales fell by around 36 percent to around 3.2 billion euros last year due to multiple lockdowns and a buyer boycott. In the fourth quarter, it even collapsed by half. In the second half of the year, buyers in Europe and America also held back due to high inflation, which increased inventories.
Former Adidas boss receives up to almost 16 million euros
The former Puma boss had surprisingly announced his move to the larger local rival at the end of last year. Previously, it was unclear for a long time who would inherit Kasper Rorsted, who had already announced his resignation in the summer. The Norwegian Gulden started without a break directly in January, which caused astonishment in view of the direct competition.
The former Henkel CEO Rorsted had not achieved much recently. He had to cut the forecast several times last year, among other things because he had misjudged the Chinese market. For many outsiders, he had also held on to the lucrative partnership with West for too long. Investors also increasingly complained about a lack of creativity and innovative strength. As can be seen from the annual report for the past year, Rorsted, whose contract would have run until the summer of 2026, will receive a severance payment of 12 million euros. In addition, there are further compensation payments that come into effect for a non-competition clause, so that he could receive a total of almost 16 million euros.