Adidas Tumbles as Losses From Its Kanye West Venture Pile Up

Bjorn Gulden has been chief executive at Adidas for just six weeks, and he’s already warning that Year 1 will be a mess.

Adidas shares fell more than 12 percent this morning, wiping roughly 3 billion euros, or about $3.2 billion, in market value after the German sportswear giant issued its fourth profit warning in the past six months and said it expected big losses in 2023.

The biggest culprit: The company’s messy split last year with the musician Kanye West, which could knock about €1.2 billion off full-year sales, and €500 million off its operating profit — an even greater loss than Adidas had calculated just four months ago. In October, Adidas severed its business alliance with the rapper, who is now known as Ye, after he went on an antisemitic rant. An immediate priority for Mr. Gulden (who was poached from Adidas’s crosstown rival, Puma) is figuring out how to sell the mountain of unsold inventory from the Yeezy line.

Wall Street had already been expecting a rough year for Adidas and Mr. Gulden, but the latest profit warning seemed to catch many who follow the company off guard. “There is a lot of work to be done across corporate culture, product, lower sell-through rate, excess inventory and digesting Yeezy exit, all of which can be done, but will take time,” Piral Dadhania, an equity analyst at RBC Capital Markets, wrote in an investor note.

He cut Adidas’s share price target to €110, implying nearly a 30 percent drop from the closing price on Thursday.

Adidas faces numerous challenges beyond its breakup with Ye. The company had been losing market share to Nike and other rivals; its expensive pullout from Russia and prolonged weakness in China have weighed on sales. And its clothing partnership with Beyoncé is also reportedly underperforming: Sales of the singer’s Ivy Park line are well off the company’s internal projections, according to The Wall Street Journal.

Mr. Gulden, who had success turning around Puma’s business after he joined that company in 2013, announced a broad strategic review that will cost Adidas €200 million. “I am convinced that over time we will make Adidas shine again,” he said. “But we need some time.”