Adidas (ADSGn.DE) reported better-than-expected quarterly earnings and said the Chinese market was recovering, sending its shares up 8%, despite the fact that its CEO cautioned the company would still have a “bumpy year with disappointing numbers.”
The German sportswear conglomerate expects a loss this year after terminating its Yeezy collaboration with artist Kanye West, who changed his name to Ye in 2021.
Loss of the highly profitable Yeezy line reduced sales by about 400 million euros in the third quarter, according to Adidas, primarily affecting revenue in North America, Greater China, and EMEA.
Adidas provided no update on what it intends to do with its unsold Yeezy sneaker supply, which Deutsche Bank analysts described as disappointing, despite the quarterly results representing positive early signs of recovery.
Adidas CEO Bjorn Gulden told reporters that the company has narrowed down its shoe possibilities and is nearing a decision.
Operating earnings of 60 million euros ($66 million) in the third quarter exceeded expert projections of 15 million euros. And, while sales decreased by 1%, this was better than the 4% drop predicted, driving an 8% increase in Adidas shares to their highest level since August.
Adidas maintained to its 2023 estimate, despite warning of a 700 million euro operating loss if the Yeezy stock is totally written down.
The loss of Yeezy had the greatest impact on North America, with currency-neutral sales falling 20% from last year. Partnerships with Bad Bunny, Pharrell Williams, and Jerry Lorenzo’s Fear of God brand, according to Gulden, are assisting Adidas in connecting with US street culture.