Adidas says effects of cutting ties with Kanye West could cost $1.3B

Germany-based sports apparel maker Adidas is set to lose a stunning $1.3 billion (1.2 billion euro) in revenue after cutting ties with Kanye West over antisemitic comments, resulting in his expensive Yeezy shoe line going unsold, sitting on shelves in outlets.

(Video Credit: Bloomberg Television)

Adidas shares plummeted 11 percent on Friday following the company warning that it could see a loss for the first time in 30 years over the split with the rapper.

According to the company, the grim outlook for 2023 “accounts for the significant adverse impact from not selling the existing stock” of Yeezy brand shoes and clothing.

On Thursday, Adidas stated that it was now reassessing its business strategy. If it can’t unload its Yeezy stock, the operating profit for the company stands to take a hit of over $533 million. The company also expects its sales to decline this year at a rate in the high single digits.

The announcement marks the company’s fourth profit warning since July.

“The numbers speak for themselves. We are currently not performing the way we should,” CEO Bjorn Gulden remarked, according to the New York Post.

He came on board Adidas on Jan. 1 after leaving rival Puma and has vowed that 2023 will be a “year of transition” to make the sportswear giant profitable again.

The announcement is a shock as analysts had predicted a 4 percent increase in 2023 revenue for the company and an operating profit of close to $1.1 billion, according to data found on Adidas’ website.

The company said shortly after the partnership was terminated that it would attempt to sell the clothing, stripped of the Yeezy name and branding. Adidas said selling the sneakers under its own branding would save the company approximately $300 million in royalty payments and marketing fees, according to CNN Business.

“There really are no good options for this distressed brand that sat somewhere between prestige and luxury,” Burt Flickinger, who is a retail expert and managing director at retail consultancy firm Strategic Resource Group, told CNN Business.

Other options for the line include destroying it or donating unsold Yeezy clothing to charities.

West’s nine-year contract with Adidas was terminated in October after he made a series of antisemitic rants in public.

Adidas stated last year that it ended its partnership with West because it “does not tolerate antisemitism and any other sort of hate speech” and said his comments were “unacceptable, hateful, and dangerous.” Adidas also said they violated the company’s “values of diversity and inclusion, mutual respect and fairness.”

The rapper appeared on Alex Jones’ show “InfoWars” in December with his face covered and wearing a hoodie. He let loose with an offensive antisemitic diatribe and praised Hitler and the Nazis.

As corporations scurried to cut ties with the singer, his net worth reportedly went from $2 billion to $400 million, according to Forbes.

Adidas was excoriated for not cutting ties with West sooner. Many assumed the company was hesitant because Ye-branded shoes pulled in approximately $2 billion in sales in 2022, according to Bloomberg.

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