Following the termination of its collaboration with rapper and fashion designer Kanye West in November, Adidas issued a warning about the potential serious impact on its financial results.
According to the company's new boss, if it decides not to sell its stock of Yeezy sneakers this year, it could lose hundreds of millions of dollars.
Ye, known as West, was fired by the sportswear giant after he made anti-Semitic remarks on social media.
The announcement is the fourth profit warning issued by the company since July.
"The statistics bear themselves out. According to Adidas' CEO Bjrn Gulden, we are not currently performing as well as we should.
If all of its remaining Yeezy stock is written off, Adidas said it would suffer a €500 million (£443 million) loss in profits.
Another €200 million is anticipated to be spent by the company on a business restructuring. Adidas might experience an operating loss of €700 million as a result this year.
At the same time the company revealed that its profit for last year had fallen to €669m.
In October, the company announced that it was ending the highly profitable partnership with West after he caused an outcry over his anti-Semitic comments.
While the decision to end its partnership with Yeezy had a major negative impact on Adidas, it has also faced other challenges over the last year.
Mr Gulden joined Adidas at the start of this year from rival Puma after his predecessor was ousted in the wake of a series of profit warnings.
In March, the company announced that it would close its shops in Russia and suspend its online store there as it joined a raft of global brands that pulled out of the country in the wake of the invasion of Ukraine.
The firm's business in China was also impacted by Beijing's strict zero Covid measures that saw major cities across the country put into lockdown.
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