Adidas AG is “no longer living on Yeezy Street” said Deutsche Bank, which cut its full-year earnings-per-share forecasts by 30%.
Analysts at the bank also trimmed their target price to €160 from €165, although maintained a 'buy' position on the stock, believe most the issues are well known and earnings have “troughed” through the current financial year.
Read: Adidas to continue making Yeezy products despite cutting ties with Kanye West
Yesterday’s quarterly results were largely as expected, said Deutsche Bank, although the broker believes the biggest question is next year's financial performance.
“Management provided a starting point of €950mln before the impact of FX, freight rates, China recovery as well as inventory clearance, the impact of lost Yeezy sales and mitigating actions.”
“We have taken the view that €950mln base will be impacted by €100mln of further lost Yeezy profits (giving €350mln lost profit in total) and a further €85mln of gross margin impact from inventory clearance and FX to get to €765mln of net income,” Deutsche Bank said.
That is a reduction of 31% from its previous estimates of €1.1bn.
Deutsche Bank said this is subject to several uncertainties and believes there is a risk of further earnings reset for the next year when a new CEO announces full-year guidance in March.