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Adidas expects major losses this year after ending a tie-up with Kanye West. Image Credit: AFP

German sportswear giant Adidas posted its first loss in more than 30 years in 2023 on Wednesday as CEO Bjorn Gulden works to turn the brand around after a messy break-up with rapper Kanye West.

Adidas has been battling to right itself after it cut ties with West in October 2022, suspending sales of the highly profitable Yeezy sneaker line.

In Gulden's first year in the role, he resumed sales of Yeezy sneakers to clear remaining stock while seeking to boost popular products like Samba and Gazelle shoes, and improve relationships with retailers. Shares in Adidas have staged a recovery, outperforming Nike and Puma since he took over.

"Although by far not good enough, 2023 ended better than what I had expected at the beginning of the year," Gulden said.

Adidas said it expects its underlying business - excluding Yeezy - to improve in 2024, with double-digit growth in the second half.

The company said its board would propose a dividend of 0.70 euros ($0.7650) per share on its 2023 performance, unchanged from a year earlier, despite posting a net loss of 58 million euros, its first since 1992. Shares in Adidas were expected to fall 2% at the open.

Adidas sees sales in North America declining this year, blaming a still-overstocked market there. Sales in all other markets are expected to grow "significantly", it said.

Adidas is gambling that it can claw back market share from Nike and others even as demand for sportswear declines overall. It has benefited from a trend for low-rise suede "terrace" sneakers such as the Samba and Gazelle, and last year ramped up production.

Footwear sales grew by 8% in the fourth quarter, while apparel sales fell 13%.

"Things have clearly been going in the right direction at Adidas since Bjorn Gulden took over," said Thomas Joekel, portfolio manager at Union Investment. "Brand heat is increasing, which can also be seen from the fact that fewer products now have to be sold at a discount." Adidas last month set expectations low for its remaining Yeezy products, saying it would sell the sneakers "at least at cost".

It launched its latest drop on Feb. 26, but demand for the shoes is difficult to predict, and not as high as a year ago when the partnership had just been terminated.