© Reuters. FILE PHOTO: A pair of Adidas Yeezy shoes are seen in a store on the day Adidas terminated its partnership with the American rapper and designer Kanye West, now known as Ye, in Garden City, New York, U.S., October 25, 2022. REUTERS/Shannon Stapleton/File P
BERLIN (Reuters) -Unexpectedly strong sales of Yeezy shoes left over from Adidas (OTC:)’ abandoned collaboration with rapper Ye should reduce the sportswear giant’s expected operating loss this year to 450 million euros ($498.56 million), the company said on Monday.
The update is likely to cheer investors betting that CEO Bjorn Gulden, at the helm since Jan. 1, can turn Adidas’ fortunes around. The German company had previously forecast a full-year operating loss of 700 million euros.
Although group revenue in the second quarter fell 5% to 5.3 billion euros, Adidas’ gross margin rose 0.6 percentage point to 50.9%, the company said on Monday in a preliminary release ahead of full second-quarter results expected on Aug. 3.
Operating profit for the second quarter was 176 million euros, down from 392 million a year earlier.
Adidas said the potential impact of a Yeezy stock write-off was now 400 million euros, down from 500 million euros expected previously. The company did not say exactly how much it sold of its Yeezy stock worth around 1.2 billion euros, but analysts estimate that around 15% of the stock has been liquidated.
Shares in Adidas have gained 37% since the start of the year as investors hope Gulden can rebuild the brand after a chaotic break-up with Ye, or Kanye West, triggered by antisemitic comments he made in interviews and on social media.
The company, which in May said it would donate proceeds from Yeezy stock sales to non-governmental organisations including the Anti-Defamation League, did not specify on Monday how much it plans to give to charity.
“If successful, potential future Yeezy drops would further improve the company’s results,” Adidas said, referring to the term used for putting new products on the market.
The shoes’ popularity has endured despite Ye’s public pronouncements, with Yeezy shoes selling at high premiums on resale sites.
Adidas said the rest of its business also did “slightly better than expected” in the second quarter.
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