Adidas has been lumped with more than a billion dollars of Yeezy stock that it may have to write off, having ended its relationship with rapper Ye, formerly known as Kanye West.
The sportswear brand cut ties with the designer and musician following offensive and anti-semitic marks he made last year. At the time, Adidas estimated the move would cost the brand $246 million but said it would "not tolerate" antisemitism or hate speech.
Now that figure has risen substantially. Despite immediately closing down production of Yeezy products—and axing any financial links with Ye's other businesses—Adidas has got vast volumes of stock in its inventory.
In new financial guidance that "accounts for the significant adverse impact from not selling the existing stock," the sportswear giant lowered expected revenues by around $1.3 billion and operating profit by around $536 million this year alone, meaning its operating profit is expected to be around break-even levels.
Worse for Adidas, the massive drop in revenue and profit come without the company making the decision to write off the existing Yeezy inventory entirely. Adidas said that doing so would hit operating profit by an additional $536 million this year. It said it would also face one-off costs of up to $214 million.
“The numbers speak for themselves," said Adidas CEO Bjørn Gulden. “2023 will be a year of transition to set the base to again be a growing and profitable company. We will put full focus on the consumer, our athletes, our retail partners and our adidas employees. Adidas has all the ingredients to be successful: A great brand, great people, fantastic partners and a global infrastructure second to none.
"We need to put the pieces back together again but I am convinced that over time we will make Adidas shine again. But we need some time.”
Shares in the company sank more than 11% Friday morning as traders reacted to the update.
Who else has cut ties with Ye?
Adidas is not alone in being left to pay the price for a relationship with the 'Bound 2' singer.
Ye and his previous wife Kim Kardashian had long enjoyed a close working relationship with design house Balenciaga. Kardashian filed for divorce in February 2022 and by October Balenciaga moved to distance itself as well.
In a statement to WWD the brand said: "Balenciaga has no longer any relationship nor any plans for future projects related to this artist." The business also removed images of Ye from its website, which showed him opening the designer's 2023 fashion show.
West had also signed a ten-year contract with Gap Inc in 2020 which he terminated in September 2022. Posts on social media revealed a strained relationship with Yeezy’s brand partners, before the rapper alleged that the company violated the terms of an agreement between the two parties. The Wall Street Journal reported letters sent from West's lawyers claimed Gap was not sticking to release schedules or opening stores as planned.
West’s Twitter and Instagram accounts have also been locked because of his antisemitic outbursts. Spokespersons for Twitter and Instagram parent Meta said in October that Ye posted messages that violated their policies.
The LA Times also reported that West had been dropped by leading talent agency CAA, and a newly-completed documentary was shelved by MRC entertainment with the production company stating it “cannot support any content that amplifies his platform.”
Ye has also suggested slavery was a choice and called the COVID-19 vaccine the “mark of the beast,” among other comments. He also was criticized during Paris Fashion Week 2022 for wearing a “White Lives Matter” T-shirt to a show and putting models in the same design.
