Adidas Faces $1 Billion Loss After Cutting Ties with Kanye West
3 min read
Jonathan Leibson/Getty Images for ADIDAS
If Adidas fails to successfully offload its inventory of Kanye West-designed Yeezy merchandise, it could lose as much as 1 billion Euros in operating profits. According to its financial guidance for 2023, the company warned that the initial “adverse impact” of not selling the items would be €1.2 billion in revenues, or about $1.3 billion; and around €500 million, or $533 million, in operating profits. A racist and antisemitic statement by West, now known as Ye, caused Adidas to drop the rapper in October. As much as 10% of Adidas’ total revenues previously came from its Yeezy line, which generated approximately $2 billion annually.
Adidas is expected to lose $1.3B in revenue in 2023 after dropping Kanye West‼️😳 pic.twitter.com/lJLMJFpQVX
— RapTV (@Rap) February 10, 2023
According to analysts, Adidas took longer than other brands to distance itself from Ye after he made a series of hateful remarks about Jews and wore a “White Lives Matter” shirt. Following the announcement of the termination of their relationship, Adidas said it does not tolerate hate speech, including antisemitism. As the company values diversity and inclusion, mutual respect, and fairness, Ye’s recent comments and actions are unacceptable, hateful, and dangerous. Since Ye’s remarks, he’s lost business with virtually every other major brand with which he’d previously worked, such as Gap, Balenciaga, Footlocker, and TJ Maxx.
BREAKING REPORT: Adidas now expected to lose 1.3 BILLION in sales after dropping Kanye West…
— Chuck Callesto (@ChuckCallesto) February 10, 2023
Full story – pic.twitter.com/dSQFeiCnoK
— Raphousetv (RHTV) (@raphousetv2) February 10, 2023
By Dropping Rapper Ye AKA Kanye West, Adidas Is Expected To Lose Over $1 Billion
In retrospect, Adidas may have overestimated the cost of dropping Kanye West. Adidas released a fiscal projection statement on Thursday (Feb. 9), which shows that by not selling existing Yeezy stock, the company will lose $1.3 billion over the next few months. There is also a possibility that their operating profit could be cut by as much as $534 million. Following a series of anti-Semitic comments from Kanye West last October, Adidas terminated its partnership with him. According to Adidas, the split cost them more than $250 million in profits and $500 million in revenue lost, while they claimed they would save $300 million in marketing fees and royalty payments. Any antisemitic or hateful speech is not tolerated by Adidas. Ye’s recent comments and actions have been unacceptable, hateful and dangerous, violating the company’s values of diversity and inclusion, mutual respect, and fairness, the company said in a statement. According to the company’s review, Ye’s partnership has been terminated immediately, production of Yeezy branded products has been discontinued, and payments to Ye and his companies have been stopped.
With immediate effect, Adidas will cease its Adidas Yeezy business. According to the statement, the high seasonality of the fourth quarter is expected to negatively impact the company’s net income in 2022 by up to €250 million. As part of the partnership, Adidas owns all design rights to existing products and previous and new colorways. In its upcoming Q3 earnings announcement on November 9, 2022, the company will provide more details. Adidas announced last November that they would sell Yeezy designs without the Yeezy name. If they do not do so, existing Yeezy inventory would be written off, and the company’s operating profit would be reduced by $534 million this year, according to the latest statement. Furthermore, the company anticipates one-time costs of up to [$213] million in 2023. The company is currently conducting a strategic review to reignite profitable growth as of 2024, which involves these costs.
checkmate pic.twitter.com/lEMMuv6k38
— micheal myers II (@ArnoldMwesigwa6) February 10, 2023
Adidas after Twitter made them drop Kanye pic.twitter.com/dkckYfwMSV
— Sharp🦈 (@Sharpp) February 10, 2023
I told people…… this is not stocks, this the shoe game !! Ppeple are called HYPEBEASTS for a reason, its based off hype…. he controls HYPE. Hes been quiet and we still streaming his music and buying his clothes
— Luvmore (@Luvmore7771) February 10, 2023
Imagine kicking out the biggest player ever part of your brand n try to resale his designs to a culture that despises knock offs only to end up sitting on a bunch of shit that won’t move so your company tanks 10 figures 😮💨
— 👹MERCI 信仰 FINO👹 (@FOREVERFINO) February 11, 2023
