(Reuters) – Adidas shares jumped on Friday after better-than-expected first-quarter results, although CEO Bjorn Gulden forecast “a bumpy year with disappointing numbers”.

The German sportswear giant is forecasting a loss this year after ending its Yeezy partnership with rapper Kanye West, who changed his name to Ye in 2021. But on Friday, Adidas (OTC:ADDYY) reported quarterly operating profit of 60 million euros ($66 million), beating analyst expectations of 15 million euros.

And although sales fell by 1%, this was also better than a forecast 4% drop, prompting a 6% rise in Adidas shares.

Losing the highly profitable Yeezy line hit sales in the quarter by around 400 million euros, Adidas said, mainly denting revenue across North America, Greater China and EMEA.

Adidas gave no update on what it plans to do with its stock of unsold Yeezy shoes, which Deutsche Bank (ETR:DBKGn) analysts said was disappointing, even though the quarterly results represented reassuring early signs of recovery.

“The decline in Lifestyle and the loss of Yeezy are of course hurting us,” said Gulden. “But also here we see some positive developments.”

Gulden said Adidas was sticking to its 2023 guidance, having warned of a 700 million euro operating loss if it decides to completely write off the Yeezy stock.

~The “terrace” style is doing well in all markets, and Adidas has started to make more Samba, Gazelle, and Campus shoes, he added.

Overall, sales were 5.274 billion euros, down from 5.302 billion euros in the first quarter of 2022.

North America was the worst hit by the Yeezy debacle, with currency-neutral sales down 20% from last year.

Sales in Greater China, a difficult region for Adidas, fell by 9%, while EMEA sales rose 4%. Latin America was a bright spot with sales up 49%.

Adidas’ gross margin fell to 44.8% due to the loss of Yeezy sales, higher supply chain costs and discounts.

Inventories rose by 25% to 5.675 billion euros and Gulden said Adidas is working hard to “normalise” levels, which would allow it to discount less and boost the brand.

($1 = 0.9062 euros)