Adidas' Decision to End Partnership with Ye Resulting in Huge Losses

Adidas could incur significantly more losses than anticipated after ending its partnership with rapper Kanye West last year. According to a fiscal projection statement released by the company on Thursday, not selling existing Yeezy inventory could result in a $1.3 billion hit over the next few months, with operating profits potentially decreasing by $534 million. The split with West was prompted by his controversial anti-Semitic comments.

Initially, Adidas estimated that the termination would cost the company $250 million in profits and $500 million in lost revenue. The company stated that they would save $300 million in marketing fees and royalty payments to West. The statement made by the company emphasized that antisemitism and hate speech are not tolerated, and that West's comments violated their values of diversity and inclusion, mutual respect and fairness.

However, the short-term negative impact on the company's net income was estimated to reach up to $250 million in 2022. Adidas owns the design rights to existing products and new colorways, but they have stated they plan to sell Yeezy designs without the Yeezy name. If they choose not to, this could result in the write-off of existing inventory and a decrease in operating profit. The company also expects one-off costs of up to $213 million in 2023 as part of their strategic review aimed at reigniting profitable growth starting in 2024.

Adidas CEO Bjørn Gulden acknowledged the company's poor performance, stating, "The numbers speak for themselves. 2023 will be a year of transition to set the base to again be a growing and profitable company." Gulden went on to emphasize the company's potential for success, citing their strong brand, talented people, fantastic partners, and global infrastructure.

The ended partnership also had a significant impact on West's finances, causing him to lose his billionaire status. He has since been searching for a new company to support his brand.

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