Adidas’ breakup with Ye, formerly known as Kanye West, is costly.
The company warned on Thursday that it expects to lose $1.3 billion (1.2 billion euros) in revenue this year because it cannot sell clothes and shoes by designer Yeezy.
Adidas ended its nine-year partnership with the rapper last October over his anti-Semitic remarks.
In a statement, Adidas said its financial guidance for 2023 “considers the material adverse impact of not selling existing inventory.”
If the company can’t “repurpose” any of the remaining Ye clothes, the company said it could cost $534 million (500 million euros) in operating profit this year.
The company said shortly after the dissolution of the partnership that it would try to sell the clothes, without the Yeezy name and branding. He also pointed out that selling the shoes under his own brand would save the company about $300 million in royalty payments and marketing fees.
Despite this attempt, Adidas will have trouble repurposing its clothing, an analyst told CNN .
“There really aren’t any good options for this worn-out brand that sits somewhere between prestige and luxury,” says Burt Flickinger, retail expert and managing director of retail consultancy Strategic Resource Group.
Other options include destroying it or donating unsold Yeezy clothing.
Adidas said it also expects “one-off costs” of $213 million (200 million euros) because of a “strategic review” the company is undergoing.
“The numbers speak for themselves. We are currently not performing the way we should,” said Adidas CEO Bjørn Gulden in a statement. He was named the company’s top leader in January and hails from rival Puma.
Adidas said last year that it ended its partnership with Ye because it “does not tolerate anti-Semitism and any other type of hate speech”, adding that his comments were “unacceptable, hateful and dangerous”. Adidas said they violated the company’s “values of diversity and inclusion, mutual respect and fairness”.
Last fall, Adidas put the “partnership under review” after Ye wore a “White Lives Matter” T-shirt in public.
The Anti-Defamation League classifies the phrase as a “hate slogan” used by white supremacist groups, including the Ku Klux Klan. He also said “I can say anti-Semitic shit and Adidas can’t abandon me”, during an anti-Jewish podcast rant.
Adidas did not mention potential issues with its Beyonce-led Ivy Park brand.
The Wall Street Journal reported this week that the streetwear brand’s sales fell 50% last year to about $40 million — well below its internal projections of $250 million. The partnership is “strong and successful,” Adidas told the Journal in response.
Adidas shares are down nearly 10% in Frankfurt trading and 45% in the past year.
Source: CNN Brasil
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