When Run DMC made the hit song “My Adidas” in 1986, the legendary rap group boosted the company’s sales. Now, nearly four decades later, the German-based retailer’s break-up with the controversial hip-hop artist formerly known as Kanye West last year is also having resounding consequences.
The sneaker giant’s stock continues to tumble a week after CEO Bjorn Gulden told investors to brace for operating losses of $700 million if no solution to the company’s Yeezy problem is found. It would be the first annual loss the company has experienced in over 30 years.
The company also slashed its dividends by 79 percent from its high of $3.30 per share in 2021 to its current 70 cents payout, the Financial Times reported.
According to a report by Reuters, stock shares were down 2.4 percent on Wednesday, March 15. Market reports show they tumbled even further to being down 4.78 percent at the time of this writing.
Gulden said 2023 would be a “transition year” for the company. “We can then start to build a profitable business again in 2024,” he added per reports.
Black Americans Have the Highest Mortality Rates But Lowest Levels of Life Insurance
Are you prioritizing your cable entertainment bill over protecting and investing in your family?
Smart Policies are as low as $30 a month, No Medical Exam Required
Click Here to Get Smart on Protecting Your Family and Loves Ones, No Matter What Happens
Adidas said it is sitting on $500 million worth of Yeezy inventory after terminating its partnership with West, who now goes by Ye, in 2022 due to statements the once-beloved MC made, which many deemed antisemitic.
The company also had a shake-up in leadership. Gulden replaced former CEO Kasper Rørsted, who helmed the company for seven years. Roland Auschel, head of global sales, and Brian Grevy, head of global brands, will also depart.
Auschel was reportedly rebuked internally for “inappropriate and unacceptable” comments he made about diversity in 2021. According to NPR, he worked at the company for 33 years and will be succeeded by Arthur Hoeld, a 25-year Adidas veteran.
Despite current financial woes, Rørsted is receiving a $15.9 million severance package, something Gulden said he thinks is fair after being questioned about the amount.
“If you give me €16mn when I get fired, I wouldn’t say it’s unfair,” Gulden said, noting he didn’t get any severance when he left Puma and it was experiencing a historical high in sales. “At least he did better than me there.”
Gulden also promised to bring the company “back to be the best sports brand in the world once again.” He asked his investors for patience as the company worked to rebuild.
“If you run the business for short-term profit in these circumstances, you can do big mistakes,” Gulden said.
A customer tries on Yeezy shoes, made by Adidas, at Laced Up, a sneaker resale store, in Paramus, N.J., Tuesday, Oct. 25, 2022. Adidas has ended its partnership with the rapper formerly known as Kanye West over his offensive and antisemitic remarks, the latest company to cut ties with Ye and a decision that the German sportswear company said would hit its bottom line. (AP Photo/Seth Wenig)
In this Oct. 24, 2019 file photo, Kanye West attends The Fashion Group International’s annual “Night of Stars” gala in New York. Kanye West turns 43 on June 8. (Photo by Evan Agostini/Invision/AP, File)
Screenshot of Adidas Stock Market Summary.