Adidas' next CEO has massive task of dealing with unsold shoes

Adidas AG revealed that unsold goods are piling up as consumer demand weakens across China and western markets, sending the German sports apparel maker’s stock slumping as much as 10 percent.

It’s Adidas' second profit warning in just three months.

Adidas shares have now lost all the gains they made during outgoing CEO Kasper Rorsted’s six-year tenure, leaving the firm with a market value about a sixth of that of US rival Nike Inc.

With problems mounting under Rorsted, including a crisis over an alliance with rapper and designer Kanye West, his replacement will need to be innovative as the future of the bestselling Yeezy line is in doubt.

Adidas had previously warned in July that sales in China were weak. The nation was previously the brand's main driver of growth, but boycotts by consumers and Covid limitations have hurt sales. Western markets' soaring inflation has reduced consumer spending power.

According to Adidas, full-year revenue will increase at a mid-single-digit rate rather than a mid- to high-single-digit rate. In the unexpected update, the German corporation reduced its prediction for the operating margin this year from 7 percent to 4 percent.

Adidas's financial goals until 2025 may have to be abandoned by Rorsted's successor due to discount sales to clear inventory, he said.

Backlogs of inventory have been a burden for the entire sector. After an oversupply of unsold goods reduced the profitability of the US sportswear giant last month, Nike shares fell.

The German business also disclosed on Thursday that one-time expenses related to things like the termination of its activities in Russia will cost it around €500 million, which will reduce this year's profit.

Adidas unveiled an optimization plan that should offset rising costs in 2019 and boost revenue by around €200 million. However, that will result in a €50 million charge in the year's fourth quarter.