Adidas slashes dividend following challenging 2022, Kanye ‘Ye’ West split

Yahoo Finance Live anchors Julie Hyman and Ines Ferre discuss fourth-quarter earnings for Adidas.

Video transcript

- Adidas saw net income slide 83% in 2022 as the company slashed its dividend. Fourth quarter sales were hit by the termination of the Yeezy partnership. And that is really the core of the questions now around what's going on with the company. I mean, Adidas, or Adidas as they like to call it in Europe, still is facing competition from other footwear giants from the likes of Nike, Reebok, et cetera.

But, really, right now, the main question for the company is, what does it do with all this Yeezy stuff, right? It got rid of its Ye partnership back in October. This stuff has a retail value of $1.3 billion. And the new CEO of the company just kept getting questions, Bjorn Golden is his name, just kept getting questions about, what are you doing to do with this?

- What are you going to do with this?

- Yeah.

- What are you going to do with this inventory that you've got, this Adidas stuff? And one of the ideas is selling these products and donating the profit to a charity there had been talk about whether another option is just getting rid of it, getting rid of the products by burning it. I mean, that's just--

- It's sort would be incredible that we're even having this discussion.

- That's a PR nightmare as well. I mean, you're going to burn products after-- I get it that you've severed ties. But it just looks like a big waste. And this is the big risk of also when you go with a personality that then you have problems with, issues that you have to sever ties with this personality that you've made such a big bet and you have invested so much money into this partnership. Then you terminate it, and this is the result. But I think a lot of this also does have to do, though, with how this will not just-- it's the bottom line, but also, how do you sell this product without a PR nightmare?

- Right. Just to back up for one second, they terminated this partnership because Kanye West, a.k.a. Ye, had made anti-Semitic comments. But, obviously, even before that, he has a history of erratic behavior, even before they signed the partnership in the first place with him. And so now they are living with the consequences of this they. Say there's a 15% to 30% chance they're going to sell all the remaining Yeezy product.

But in the meantime, other stuff's going on. Their Asia-Pacific sales fell by 31%. They proposed slashing their dividend by 79%. So this is a company where that new CEO I mentioned really has quite a bit of rebuilding to do, even if you look underneath of that Yeezy partnership. Gross margins have been declining for the company. So this is the biggest, most visible thing. But there are some other things to take care of underneath the surface as well.

- Yeah. That's right. And they had also warned about this unsold product, Yeezy product, some time ago back in February as well. So the Street was expecting this.