The German sports footwear and apparel giant said its operating profit plunged 55% to €176 million (US$195 million) during the April-June period, on flat revenue in local currencies but with a 5% decline in euros to 5.3 billion.

While its gross margin rose, Adidas said that its margin which includes operating costs dropped by more than half to 3.3%.

Nevertheless, the company said the sale of its inventory of Kanye West’s Yeezy products in May, along with business going a bit better than planned, will help it post a lower annual loss than it earlier expected.

Adidas now expects to end the year with an operating loss of €450 million, compared to its earlier forecast of a €700 million loss.

Adidas ended its partnership with the controversial rapper Yeezy in October 2022 after he made a series of anti-Semitic outbursts.

As a result, the group ended production of the highly successful Yeezy line designed with West.

Not selling the apparel and shoes linked to West would potentially lead to a revenue loss of €1.2 billion, the group said when it announced its 2022 full-year results earlier in May.

While it donated profits, the May sale helped reduce Adidas’ loss.

It said the potential write-off of the remaining Yeezy inventory is €400 million, compared to €500 million before the sale.

“If successful, potential future Yeezy drops would further improve the company’s results,” Adidas said.

Excluding one-off impacts related to Yeezy and a strategic review underway Adidas said it expects its operating performance to be around the break-even point.

The company is due to release its full second-quarter results on Aug 3.