Adidas Slips To Q4 Loss, Cuts Dividend, Warns On FY23; Stock Down

(RTTNews) - Shares of adidas AG were losing around 2 percent in the morning trading in Germany after the sports sneaker and apparel maker on Wednesday reported a loss in its fourth quarter, compared to last year's profit, hurt by charges mainly related to the termination of the Yeezy partnership. Further, the company trimmed its dividend, and said it projects an operating loss and weak sales in fiscal 2023 mainly hit by Yeezy impact.

Bjorn Gulden, CEO of adidas, said, "2023 will be a transition year to build the base for 2024 and 2025. We need to reduce inventories and lower discounts. We can then start to build a profitable business again in 2024."

The adidas Executive and Supervisory Boards will recommend paying a dividend of 0.70 euros per dividend-entitled share to shareholders at the Annual General Meeting on May 11, down from last year's 3.30 euros.

Looking ahead for fiscal 2023, adidas expects to report an operating loss of 700 million euros in 2023 including additional negative impact of 500 million euros from potential Yeezy inventory write-off and up to 200 million euros of one-off costs part of an ongoing strategic review aimed at reigniting profitable growth as of 2024.

Underlying operating profit is projected to be around the break-even level in 2023, while currency-neutral revenues would decline at a high-single-digit rate.

The company said it continues to review future options for the utilization of its Yeezy inventory, but the guidance already reflects the revenue loss of around 1.2 billion euros from potentially not selling the existing stock.

In fiscal 2022, net income from continuing operations decreased 83 percent year-over-year to 254 million euros, and operating profit decreased 66 percent to 669 million euros.

Annual revenues, however, grew 6 percent to 22.51 billion euros, and currency-neutral revenues grew 1 percent.

In its fourth quarter, the company's net loss attributable to shareholders was 512 million euros or 2.87 euros per share, compared to prior year's profit of 202 million euros or 1.05 euros per share.

Net loss from continuing operations of 482 million euros, compared to profit of 123 million euros in the prior year. Loss per share from continuing operations was 2.69 euros, compared to profit of 0.58 euros a year ago.

adidas recorded an operating loss of 724 million euros, compared to operating profit of 66 million euros in the prior year.

Total adidas net sales increased 1.3 percent to 5.21 billion euros from last year's 5.14 billion euros. Currency-neutral revenues in the fourth quarter declined 1 percent hurt by the negative impact of around 600 million euros related to the company's decision to terminate the Yeezy partnership at the end of October. The company also recorded strong revenue decline in Greater China due to the challenging market environment.

However, revenues in Latin America grew 47 percent, Asia-Pacific went up 16 percent, and EMEA revenues grew 12 percent. Currency-neutral sales increased 6 percent in North America amid the discontinuation of the Yeezy partnership which had a particularly strong impact in this market.

While e-commerce revenues decreased 4 percent during the quarter, sales in adidas own retail stores increased 1 percent.

In Germany, adidas shares were trading at 141.28 euros, down 2.19 percent.

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