Preliminary unaudited 2022 results for Adidas show a 66 percent decline in annual operating profit to €669 million, or an estimated $715.3 million, pushing the operating margin down to 3.0 percent from 9.4 percent in 2021. Net income from continuing operations dropped by 83 percent to €254 million, about $271.6 million. Annual gross margin slid by 340 basis points to 47.3 percent from 50.7 percent. FY22 total revenues rose 6 percent in reported terms (1% in constant-currency) to €22,511, or an estimated $24.1billion.

“The numbers speak for themselves. We are currently not performing the way we should,” said adidas CEO Bjorn Gulden in a prepared statement. “2023 will be a year of transition to set the base to again be a growing and profitable company.”

But there are roadblocks on the FY23 horizon for the group, namely how it utilizes existing Yeezy inventory. If adidas opts against selling the products, revenues will decline by approximately €1.2 billion and operating profit will fall by an estimated €500 million. Against these parameters, the company is forecasting a high-single digit drop in currency-neutral sales in FY23 and a “break-even” operating profit.

Adidas is currently conducting a strategic review aimed at “re-igniting profitable growth” in 2024, but it will take a larger hit to its FY23 operating profit target if it decides against repurposing any of its existing Yeezy merchandise. That scenario would lower the company’s operating profit by an additional €500 million this year and coupled with an expected €200 million in one-time costs would result in an annual operating loss of some €700 million this year.