Adidas turnaround gathers pace as Yeezy boosts margins

investing.com:

By Helen Reid

LONDON (Reuters) — Adidas (OTC:ADDYY) delivered further signs that its turnaround is gathering pace on Thursday as the sportswear giant seeks to shift focus onto its strategy and away from its sell-down of remaining Yeezy shoes.

Adidas shares have gained 40% since the start of the year as investors bet on CEO Bjorn Gulden's ability to reboot the brand after it cut ties with Yeezy designer Ye, the rapper previously known as Kanye West, over his antisemitic comments.

While confirming that strong sales of Yeezy stocks have so far helped narrow a projected full-year loss, Adidas executives played down expectations for the next releases, saying it is difficult to predict demand for the shoes.

Adidas has to manage Yeezy drops very carefully, Gulden said, adding that the company's guidance was conservative.

«Our task now is to limit the damage, get rid of the inventory, use the proceeds to (do) good stuff, and then build a business without Yeezy,» Gulden told reporters on a call.

The first Yeezy drop added two percentage points to gross margin for the quarter, Chief Financial Officer Harm Ohlmeyer said.

Adidas' 2023 outlook does not include the second Yeezy release, which is being sold through retailers as well as Adidas' own channels. JD (NASDAQ:JD) Sports said it had started selling Yeezy shoes from the second drop on Wednesday.

Citi analysts expect further Yeezy drops to generate 1.5 billion euros ($1.64 billion) in revenues and 700 million euros in earnings after Adidas' planned charity donations.

Adidas donated 10 million euros in the second quarter and set aside 100 million euros for further donations to charities including the Foundation to Combat Antisemitism and the Anti-Defamation League.

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