Adidas Loses Billions After Dissolving Partnership With Kanye West
Adidas recently announced that it is expecting to take a significant hit in its profits due to the dissolution of their nine-year partnership with rapper Kanye West. The company estimates that it will lose $1.3 billion (1.2 billion euro) in revenue this year due to the inability to sell Yeezy clothing and shoes. Adidas is also expecting to lose $534 million (500 million euro) in operating profit as a result of not being able to repurpose any remaining Ye clothing, as well as $213 million (200 million euro) in one-off costs due to strategic review.
The partnership between the two came to an end in October 2020 due to Kanye West’s antisemitic remarks. Since then, Adidas has attempted to salvage the Yeezy brand by selling the clothes stripped from the Yeezy name and branding. However, according to retail expert and managing director at retail consultancy Strategic Resource Group Burt Flickinger, the clothing has no place in the market and there are no good ways for Adidas to repurpose the items.
Other options that have been considered include destroying the clothing, or donating them to charity, though both of these have their own complications and consequences. Ultimately, Adidas has decided to continue to sell Kanye West’s shoe designs without the Yeezy name. Despite the significant losses they are expecting to experience, Adidas is optimistic that they will be able to bounce back financially in the future.
The numbers don’t lie.
Adidas’ fortunes have been on a downward slide lately, and according to its CEO Bjørn Gulden, it isn’t performing the way it should. Gulden was appointed to the top post in January after coming from rival Puma, but Adidas’ woes have been with the company since before then.
The troubles with Adidas started when the company ended its partnership with Kanye West last year. The reason? His comments, which Adidas said were “unacceptable, hateful and dangerous,” and violated the company’s core values such as diversity, inclusion, and mutual respect.
Kanye’s ill-fated partnership with Adidas also includes a public wearing of a “White Lives Matter” t-shirt. The Anti-Defamation League labeled it as a hate slogan used by white supremacist groups, including the Ku Klux Klan. He also caused further controversy when he made anti-Semitic comments on a podcast.
The issue with Kanye isn’t the only problem Adidas has faced. The Wall Street Journal recently reported that the sales of Adidas’ Ivy Park brand, which is led by Beyoncé, fell by 50% to $40 million last year. This is a far cry from the company’s internal projections of $250 million. Despite this, Adidas said that their partnership with Beyoncé was still “strong and successful.”
The news seemed to hit investors’ wallets hard, as shares of Adidas tanked by 11% in Frankfurt trading. In the last year, Adidas stock has dropped by 45%.
The numbers are clear: Adidas’ relationship with Kanye West and the downward sales of Ivy Park have both had a major impact on the company’s performance in the last year. If the company wants to turn things around, it needs to find a way to fix both issues. Otherwise, its stock may continue to drop.