(new: statements from the annual press conference, updated share price reaction)

HERZOGENAURACH (dpa-AFX) - After a slump in profits last year, the outlook for sporting goods manufacturer Adidas remains bleak for the time being. The company's new CEO Björn Gulden sees the company facing another difficult year: uncertain economic prospects and their impact on consumption, high inventories especially in the U.S. and Europe, as well as the unclear situation surrounding the Yeezy products in stockpile from the terminated cooperation with controversial U.S. rapper Kanye West are likely to weigh on the business.

Adidas shares temporarily lost more than three percent on Wednesday. At lunchtime, the stock was still down a good one percent and was one of the weakest stocks on the Dax.

Market participants were initially disappointed by a sharp dividend cut and the merely confirmed business expectations for the current year. In addition, analyst Volker Bosse of Baader Bank missed statements on medium-term targets. The final figures largely coincided with those already published in February, noted analyst Piral Dadhania of Canadian bank RBC. The data on inventories showed an increase of almost half. At six billion euros, they were above his assumption, the expert wrote.

"2023 will be a transition year to lay the foundation for 2024 and 2025," Adidas CEO Gulden said when presenting the annual figures in Herzogenaurach. The company will have to reduce inventories and scale back discounts, he said. "In 2024, we can then start building a profitable business again," said the manager, who joined Adidas from local rival Puma at the start of the year.

In this context, discounting is likely to increase massively again initially, especially in the next six months, Gulden estimates. Europe and especially the USA are sitting on high inventories. As a result of the supply chain problems, dealers ordered a considerable amount of additional products last year in order to be able to meet the high demand at that time. These are now sitting in warehouses and are meeting with increasing consumer reluctance to buy.

Yeezy products alone account for 0.4 billion of the six billion euros in inventories. How Adidas will deal with this is still open. Options range from various sales options, which could include donating the proceeds to organizations, to destroying the merchandise. It's one of the most difficult decisions ever, Gulden said. He called the product line, from which Adidas had earned splendidly in recent years, "irreplaceable."

Gulden does not see himself under time pressure to make a decision. At the moment, he said, there were many discussions going on about how Adidas should deal with this. Recent rumors about "negotiations" over the stocks are not true, he said. Adidas had terminated the cooperation last year, among other things, because of anti-Semitism allegations against the rapper.

The management expects sales losses of 1.2 billion euros in the current year due to the loss of Yeezy products alone. Already in the final quarter of 2022, revenues of around 600 million euros were lost due to the termination of the cooperation. Overall, the company expects a currency-adjusted sales decline in the high single-digit percentage range, also in view of the ongoing massive discount campaigns. Gulden hopes that Adidas will return to growth in 2024.

Adidas is thus sticking to its forecast for 2023. Back in February, the company had also announced a half-billion-euro write-down on Yeezy products in the worst-case scenario, with the prospect of an operating loss of 700 million euros. Excluding possible write-downs and special effects such as costs for a remodeling program, the result is likely to be at break-even.

Gulden has set his sights on improving the sports fashion business and aims to strengthen both the direct-to-consumer and wholesale businesses. In contrast, the China business, which is traditionally more tailored to sports fashion, is to receive more attention.

This will also involve significant changes to the Management Board. Roland Auschel, who is responsible for sales, will leave Adidas after 33 years, ten of which he spent as a member of the Executive Board. He will be succeeded on April 1 by Arthur Hoeld, who has also been with Adidas for 25 years. Also leaving his post will be Product and Marketing Director Brian Greevy, whose duties will be taken over by Group CEO Gulden himself. In the current situation, quick decisions are needed, the manager justified this step. In contrast, the contract of Harm Ohlmeyer, who has been Chief Financial Officer since 2017, was prematurely extended by a further three years until the beginning of 2028.

In 2022, Adidas had recorded a significant drop in profits. Profit from continuing operations slumped from just under 1.5 billion to 254 million euros. The sporting goods manufacturer thus confirmed its previously presented preliminary figures. In the fourth quarter, the company posted a loss of 482 million euros, compared with a profit of 123 million euros a year earlier. Shareholders will therefore have to prepare for a significantly lower dividend: They are to receive a payment of 0.70 euros per share for 2022, compared with 3.30 euros in the previous year, Adidas further announced.

Adidas had to lower its forecast several times last year. Former chief Kasper Rorsted, whose contract originally ran until 2026, had to go. Including certain compensation payments, he will receive a total of up to just under 16 million euros, 12 million euros of which will be a one-time severance payment./nas/stw/mis