Adidas Didn't Just Fix Itself. It Got Paid to Bury Its Worst Mistake.

In October 2022, Adidas cut ties with Ye and was left holding roughly €1.2 billion a year of sneakers it could no longer sell under the only name that made them worth that much.⁵ It was the most expensive inventory in the company's history and, briefly, the most worthless: a warehouse of shoes designed for a partnership that no longer existed. Two years later, those same shoes had quietly become part of one of the best years Adidas ever posted. The brand that nearly wrote them off instead sold them down - and booked the proceeds as a turnaround.

The story everyone tells is clean: a new CEO arrived, rescued Adidas from a €700M operating loss, and engineered a roaring comeback. Almost every load-bearing word of that is doing more work than the record supports. The €700M was a worst-case scenario, not an outcome. The rescue was real - but part of it was paid for by the very mistake it was supposedly cleaning up.

The loss that never happened

Bjørn Gulden's appointment was announced in November 2022; his formal start date was January 1, 2023.¹ He walked into a company whose operating profit had already collapsed 66% the year before, to €669M from nearly €2 billion in 2021.⁴ In early 2023 he sketched the worst case out loud - an operating loss that could reach €700M - and that figure is the one the legend kept. But it was a ceiling on the damage, not a forecast of it. The actual 2023 result was an operating profit of €268M.⁵ Adidas did not get pulled back from a €700M loss; it never fell into one. Guidance had been revised upward repeatedly before the year even closed.

Why the distinction matters: a turnaround measured against an imagined catastrophe always looks heroic. Measured against what actually happened, the 2023 number was a battered company holding on. The genuine swing came the following year - and that is where the texture lives.

The real recovery - and the asterisk attached to it

2024 is where the turnaround stops being a framing argument and becomes a fact. Revenues rose 11% to €23.7 billion, gross margin climbed 3.3 points to 50.8%, operating profit nearly quintupled to €1.337 billion, and the bottom line flipped from a €58M net loss to €824M of net income from continuing operations.² That is not spin. A business does not expand gross margin by more than three points by accident; that is product, pricing, and discipline working together. Gulden's instinct - sell what people want, stop forcing what they don't, and let the wholesale partners breathe - showed up in the one number hardest to fake.

Here is the asterisk. Of that more-than-€1-billion improvement in operating profit, Adidas itself attributes roughly €200M to Yeezy - the liquidation of inventory from the partnership it had severed.³ By the time Gulden ran his first full quarters, the company had already sold €750M of that stranded stock back into the market through a small number of carefully managed drops.⁵ The same shoes that nearly forced a write-off became, instead, a profit stream. It was a smart decision. But it was also a one-time decision: you can only sell a finite pile of sneakers once. Adidas's own 2025 outlook confirms it - that ~€650M of Yeezy revenue and ~€200M of profit will not recur.³

The market that didn't come back

Look at the geography and the unfinished work appears. North America - the single market that most defines a global sportswear brand's status - did not recover in 2024. Its full-year revenues fell 1.6%, dragged by lower Yeezy sales and a deliberately conservative wholesale sell-in.⁶ The segment's operating profit rose sharply, up 76% to €480M on a better gross margin and lower costs⁶ - which tells you Adidas got more profitable in North America by selling less, more carefully, not by winning back demand. That is a holding action, not a conquest. Gulden has said as much: getting fully competitive there 'will take time.' A turnaround that leaves your most important market still shrinking is not complete; it is in progress.

But isn't a turnaround just the leader making good calls?

The fair objection is that this analysis is too stingy. Every great recovery uses whatever's lying around - and turning a near-write-off into €200M of profit is exactly the kind of resourcefulness a turnaround is supposed to show. Why penalize Gulden for selling the Yeezy stock well? The answer is that we aren't penalizing the decision; we're questioning the durability of what it produced. A one-time inventory liquidation flatters the run-rate, and a margin still under 10% with North America in retreat means the structural engine hasn't been rebuilt yet - only restarted. The honest version is the strongest case for Gulden anyway: the brand momentum, the gross-margin discipline, and the restored wholesale relationships are real and recurring; the Yeezy money and the worst-case-loss framing are not. The board clearly believes the durable part wins - it extended his contract through 2030, with the chair crediting him with driving the 'successful turnaround.'⁷ The filings show why that belief is reasonable. They also show why 2025, with no Yeezy to lean on, is the year the claim gets tested.

Gulden did the hard, unglamorous thing: he stopped Adidas from bleeding, expanded the margin, and turned a partnership disaster into cash instead of a write-off. That is a genuine turnaround, and the board is right to keep him. But the cleanest version of the story - rescued from a €700M loss, defied a forecast, brand fully restored - is a legend assembled from a worst-case that never happened and a market that hasn't come back. The truest sentence is the less satisfying one. Adidas got paid to bury its worst mistake, and the burial money is almost spent. What's left is the company underneath - and 2025, with no Yeezy in the warehouse, is the first year we find out whether the turnaround was the inventory or the brand.