What's going on?

German sportswear giant Adidas didn�t have a sporting chance, posting a mishit of an update on Wednesday.

What does this mean?

Adidas is in a bit of a pickle right now. For one, sales in China � the company�s one-time growth engine � dropped by half last quarter, as local competitors and lockdowns kept shoppers away. And for another, the company faced the thorny matter of Ye (formerly known as Kanye West): a series of controversial comments saw Adidas end its collaboration with the rapper, shelving his highly popular Yeezy sneaker line to boot. That move didn�t just lose the firm sales last quarter, it also left Adidas with a $1-billion-plus heap of unsellable gear. It came as no huge surprise, then, that the sportswear giant posted an operating loss last quarter. But what did shock shareholders was the outlook: the company said the break with Ye could make 2023 its first annual loss in 31 years � and that, combined with a 79% dividend cut, had investors heading for the exits.

Why should I care?

Zooming in: Not so “Happy”.
Adidas is facing a real doozy here. Yeezys make up less than 10% of its revenue, but they�re estimated to account for over 40% of profit � and that means Adidas is staring down the barrel of a serious financial threat, even if it manages to repurpose and sell the remaining stock. What�s more, the association with Ye probably gave Adidas� other offerings a popularity boost too, so the firm will have to rely on different famous collaborators to plug the gap from now on. (Good luck, Pharrell Williams.)

The bigger picture: Just do it.
This news will have Nike � Adidas� arch-rival and the biggest sportswear company in the world � cracking a smile. Reports say that Nike�s already benefiting, dominating last month�s sneaker sales. And that�s got analysts thinking the fitter firm will keep advancing as Adidas retreats, laying claim to its competitor�s market share.