Adidas books profit as it sells off Kanye inventory
Source: AFP
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Adidas said Thursday it booked a profit in the second quarter, showing tentative signs of recovery as it sells off its huge inventory of rapper Kanye West's Yeezy merchandise.
The German sportswear giant reported a net profit of 84 million euros ($92 million) from April to June, following two consecutive quarters of losses.
But this was still substantially lower than in the same period a year earlier.
Adidas has endured a period of chaos since October last year when it ended its lucrative tie-up with rapper West -- now known formally as Ye -- after he made a series of antisemitic outbursts.
The group ended production of the highly successful Yeezy line designed with West, and was saddled with a vast stock of surplus trainers.
Adidas also faced problems in China, long one of its key markets.
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But there were improvements on both these fronts in the second quarter.
Adidas's first sell-off of Yeezy shoes, launched in late May, generated about 400 million euros in sales.
"The sale of the first part of the Yeezy inventory did of course help both our top and bottom line in the quarter," said CEO Bjorn Gulden in a statement.
"We will continue to carefully sell off more of the existing Yeezy inventory. This is much better than destroying and writing off the inventory."
It allows Adidas to make "substantial donations" to NGOs while "of course also helping both our cash flow and general financial strength," Gulden added.
Charity donations
Adidas is giving cash to organisations such as the Anti-Defamation League and the Philonise and Keeta Floyd Institute for Social Change.
Philonise Floyd is the brother of George Floyd, a Black American murdered by a white police officer who pinned him to the ground by kneeling on his neck for nearly 10 minutes.
Adidas set aside 110 million euros in the second quarter for donations to charities, of which 10 million has already been disbursed.
The company is launching a second sell-off of Yeezy stock this month but does not expect it to be as profitable as the first, which was offering more expensive products.
Adidas already announced last week that the sale of the merchandise, along with business going a bit better than expected, would help it post a lower annual loss than earlier pencilled in.
It now expects to end the year with an operating loss of 450 million euros, compared to its earlier forecast of a 700-million-euro loss.
In China, where sales had plummeted by a third in 2022 partly due to continued measures against the coronavirus, business showed signs of picking up, with revenues up strongly.
"We see a positive trend on the China market," Gulden said.
Adidas shares were up 1.4 percent on the Frankfurt Stock Exchange after the results were released.
Source: AFP
